Interpreting legacies to misdescribed charities and how to avoid the pitfalls

The recent High Court case of Knipe v The British Racing Drivers’ Motor Sport Charity and Ors [2020] EWHC 3295 (Ch) (examined below) highlighted the importance of ensuring that the charity a testator or testatrix intends to benefit is clearly identified so as to avoid any future disputes as to the validity of the legacy.

The case centred on two charities which did not exist being named as beneficiaries, with the High Court having to determine what the testator intended when he made his Will.

Correctly Describing a Charity

The description of a charity will depend on its legal structure and we have set out guidance below on how gifts by Will to some of the most common forms of charities should be drafted.

Charitable Company:

• Full registered name;
• Any working name or acronym it may be more widely known as;
• Full address;
• Registered company number; and
• Registered charity number (if applicable).

Charitable Incorporated Organisation (CIO):

• Full registered name;
• Any working name or acronym it may be more widely known as;
• Full address; and
• Registered charity number.

Trust or Unincorporated Association:

• Full name;
• Any working name or acronym it may be more widely known as;
• Full address; and
• Registered charity number (if applicable).

For charities registered with the Charity Commission in England and Wales, the registered charity number will be important to include in a description in a Will. However, not all charities in England and Wales are required to register. These include small unregistered charities (gross annual income does not exceed £5,000), exempt charities and excepted charities. In these cases, as above, a full description should be provided including full name, any working name or acronym it may be more widely known as, full address and any other registered number. In the case of exempt charities, this may include registration numbers with other regulators, for example, the Financial Conduct Authority.

It is not uncommon for charitable organisations to be misdescribed in Wills, particularly in the case of homemade Wills. However, charities can make it easier for people who wish to leave a legacy to them by providing bespoke wording to be used in Wills. This simple safeguard will ensure that a charity is correctly identified and will reduce the risk of a legal challenge against a legacy. After all, any ambiguity can result in prolonged disputes which can be costly. Provision of bespoke wording is common practice amongst the larger, registered charities, however, not all charities have their own wording and it is certainly something to consider if your charity benefits from legacy income.

Knipe v The British Racing Drivers’ Motor Sport Charity and Ors [2020] EWHC 3295 (Ch) - Background

The testator died in September 2018, domiciled in England and Wales. By the terms of his Will, the testator gave the residue of his estate in a number of shares to four institutions, as follows:

"(a) as to Fifty per cent thereof to the British Racing Drivers Club Benevolent Fund;

(b) as to Thirty per cent thereof to the British Racing Drivers Club absolutely, but with the request that the monies be held as the 'Barrie Williams scholarship fund' and used at the discretion of the club to provide for an annual scholarship for the training of young racing drivers;

(c) as to Ten per cent for the Royal Society for the Prevention of Cruelty to Animals;

(d) as to Ten per cent for the Cancer Research Fund."

Issues arose regarding the true construction of two of the gifts, (a) and (d). The two institutions named did not actually exist and, unfortunately, any potential evidence as to the testator's instructions had been lost as the original Will file had been destroyed. The identities of these two residuary beneficiaries needed to be resolved and the executor therefore applied to the court for confirmation as to the construction of the Will.

The Court’s Decision

Matthew J applied the principles recognised in Marley v Rawlings [2015] AC 129 to find the intention of the testator:

“… by identifying the meaning of the relevant words, (a) in the light of (i) the natural and ordinary meaning of those words, (ii) the overall purpose of the document, (iii) any other provisions of the document, (iv) the facts known or assumed by the parties at the time that the document was executed, and (v) common sense, but (b) ignoring subjective evidence of any party's intentions”.

The court’s aim is “to identify the intention of the party or parties to the document by interpreting the words used in their documentary, factual and commercial context.”

“British Racing Drivers Club Benevolent Fund”

The Testator was a retired professional racing driver, and a long-standing member of the British Racing Drivers' Club. However, there was no institution with the name “British Racing Drivers Club Benevolent Fund”.

Matthew J held that in light of the testator’s professional background, his membership of the club and his long familiarity with its affairs, and in the absence of any other candidate, the gift to “British Racing Drivers' Club Benevolent Fund" should be construed as a gift to the British Racing Drivers’ Club Motor Sports Charity. The British Racing Drivers’ Club Motor Sports Charity is a registered charity and the only benevolent fund administered by the British Racing Drivers’ Club (a non-charitable unincorporated association).

The court found that the testator must have intended this charity as the beneficiary of the legacy. This was a simple case of construing the words in the Will in the context in which the testator had used them.

“Cancer Research Fund”

Similarly, in the case of “Cancer Research Fund”, there was no existing registered charity known by that name. According to section 21 of the Administration of Justice Act 1982, where the language used in a Will is ambiguous on the face of it or in light of surrounding circumstances, extrinsic evidence may be admitted to assist in its interpretation. The court therefore admitted extrinsic evidence in accordance with section 21 the 1982 Act to assist in its interpretation of the phrase.

This evidence showed that a number of subsidiary charities of larger registered charities had shared that name, but that these had been removed from the Charity Commission’s register of charities. Four subsidiary charities existed when the testator made his Will but none of these were still in existence at the date of the Testator’s death. The court held that there was no evidence to suggest that the Testator had intended to benefit any particular cancer research charity when he drafted his Will, neither was there any evidence of a strong connection to a particular charity.  The court held that, given the other charitable elements in the Will, there was a clear general charitable intention and the reference in the Will was a gift for the general charitable purpose of cancer research rather than to a particular charitable institution. It was therefore for the executor to apply that part of the residue to a Cancer Research charity of his choice.

In support of his submission, the executor quoted the Charity Commission’s operational guidance, “Will Cases: Redirecting Failed Charitable Legacies” (here). Paragraph B2.2 of this guidance considers the question of whether a gift is a purpose gift or a gift to a particular institution. It reads “It is not always obvious whether a gift is a gift for particular purposes (a purpose gift) or whether it is a gift to a particular institution. Where a gift is a purpose gift, the executors can decide for themselves how best to dispose of the legacy so as to further the relevant charitable purposes. In the case of a gift to an unincorporated charity, this can often be regarded as a gift for the particular charitable purposes of that charity rather than to the particular charity. This may be important where the particular charity has ceased to exist."

The High Court decision can be read in full here.