This case, Brooke v Purton [2014] EWHC 547 (Ch), is an example of a misunderstanding of the purpose of a precedent and of the court’s willingness to approach the interpretation of wills in a more relaxed way following various House of Lords decisions on the interpretation of contracts.

See, for example, Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38: ‘[T]here is not, so to speak, a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant’ and the comments of Lord Neuberger on interpretation of wills in Marley v Rawlings [2014] UKSC 2.

Facts

The testator had two minor children with his cohabitee, and three adult children by another relationship. The principal component of his estate was a 90% shareholding in an unquoted company, with the balance being real property, vintage vehicles and cash. In 2009, the testator sought legal advice on wills and inheritance tax planning. The estate was substantial.

The testator wanted to ensure that his estate would be divided equally between his cohabitee and his five children on his death, but was concerned that his younger children would be unable to manage a large inheritance.

Following discussions with his solicitor, it was agreed that it would be appropriate to arrange a discretionary trust ensuring that any business assets that he had would pass to the trustees to manage so that they could decide when and how the beneficiaries would receive their inheritance. The other, less valuable, assets would make up the residue of the estate and would be left absolutely.

The solicitor wrote to the client explaining that the will would include a discretionary trust and that the first assets to enter the trust would be those attracting business property relief followed by other assets such as cash and so on.

Unfortunately, the solicitor prepared the will using an inappropriate precedent intended for the common situation of a nil-rate band legacy plus residue to spouse.

It gave a ‘nil-rate sum’ to the trust and the residue to the cohabitee and children absolutely and in equal shares. Essentially, the clause defined the nil-rate sum as £325,000 ‘less the value of any chargeable as opposed to exempt transfers’. It also gave the trustees ‘such items of relevant business property and agricultural property’ as ‘have an aggregate reduced value not exceeding the nil-rate sum’.

Given the fact that the net chargeable value of the estate after deduction of reliefs was £1.5m, this meant there would be nothing to enter the discretionary trust and everything would pass under the absolute gift of residue – exactly what the testator did not want.

The applicant executors and trustees applied for the court to correct the will by construction and/or rectification.

Decision

David Donaldson QC (sitting as a deputy High Court judge) said that it was apparent that a literal reading of the will could not plausibly represent the testator’s intentions. It was clear that something had gone seriously wrong, and how.

He said it was not necessary to consider rectification as Lord Neuberger had made it clear in Marley v Rawlings that the correct approach to the interpretation of wills is the same as the correct approach to the interpretation of other documents (at [20]: ‘Whether the document in question is a commercial contract or a will, the 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’).

The will could simply be interpreted to give effect to the testator’s intentions.

He concluded that the will was to be construed as if the direction to deduct chargeable transfers were omitted, producing a nil-rate sum equal to the statutory nil-rate band. Business assets with 100% relief therefore passed without limit to the trust together with a top-up of other assets.

He reached this conclusion without reference to section 21 of the Administration of Justice Act 1982, which allows the admission of extrinsic evidence in certain circumstances. However, in his view, the application of the section would have strengthened his conclusion.

Section 21 allows extrinsic evidence to be admitted, inter alia, where the language used is ‘ambiguous on the face of it’. This was a case where, after considering ‘armchair’ evidence of matters known to or in the contemplation of the testator, there was uncertainty as to what was intended by the wording of the will.

The judge said: ‘Though that might not be accepted as an ambiguity in linguistic philosophy or analysis, I can see no reason why the concept in section 21 should be so constrained. On the contrary, it is in my view both desirable and appropriate that the concept of ambiguity in section 21 of the 1982 act should be broadly interpreted. Section 21(1)(c) is therefore in my view both engaged and satisfied, opening the door to extrinsic evidence of intention.’

Does it matter whether the court interprets or rectifies a will?

At first sight, it might seem irrelevant whether a particular approach is one of interpretation or rectification. However, as Lord Neuberger said in Marley v Rawlings, it is by no means simply an academic issue of categorisation.

If it is a question of interpretation, then the document in question has, and has always had, the meaning and effect as determined by the court, and that is the end of the matter.

On the other hand, if it is a question of rectification, then the document, as rectified, has a different meaning from that which it appears to have on its face, and the court would have jurisdiction to refuse rectification or to grant it on terms (for example, if there had been delay, change of position, or third-party reliance). There is also a time constraint as applications for rectification (like applications under the Inheritance (Provision for Family and Dependants) Act 1975) must be made within six months from the date of the grant or obtain leave to apply out of time.

Lesley King, University of Law

Topics