RE WHITE

When a testator decides to bequeath his business to both his widow and former business partner, questions are raised as to exactly how those assets are determined, and whether liability for accrued debts and outstanding taxes are inclusive of such a gift.

Having worked as a house furnisher for many years, the deceased had taken steps to turn his assistant into a partner, so as to enable her to continue running the company after his death, as explained in clause 7 of the will:

“7. I give and bequeath the business of a house furnisher at present carried on by me at 64 Myddleton Road, Bowes Park . . . as to two-thirds to my wife Margaret absolutely and as to the other one-third to Bessie Amy Hull (in consideration of her long and faithful service) for their own use and benefit absolutely and it is my wish that the said Bessie Amy Hull shall carry on and manage the business as she shall think fit.”

As would be expected with any ongoing business, there were a number of financial assets and liabilities, including £6660 in a personal bank account use for private and business transactions, associated stock materials, debts of £608, outstanding client invoices, £252 from a previous commercially used property sale, the freehold property currently used for business purposes and death-related liabilities of £1247.

The question raised by the executors was one in need of clarification regards what constituted business assets and liabilities, and what then lapsed into the residual estate for the benefit of the widow.

Relying upon recent cases such as Re Rhagg and In re Barfield from which to draw lines of demarcation, the judge found himself at odds with how best to separate each from the other, while taking issue with the notion that a testator declares such things as a gesture of goodwill, as opposed to an all-encompassing act of deliberation.

It was also argued that while an air of expectation lay in the mind of the widow, the meaning of residuary was not one of hierarchy, but instead that containing items and assets remaining after dispensation of the estate.

Turning instead to the essence of clause 7, the judge drew note to the testator’s wish for the business to continue, thereby taking a broader view of how each component held within the functioning of any enterprise must be considered as essential to its continued operation, thus ruling that aside from the outstanding taxes owed by the testator, all other items were to fall under the umbrella of the business; and so, nothing would lapse into the residual estate, an ethos underpinned by the words of Simonds J in Rhagg, when he outlined how:

“[T]he substance of the bequest is the assets of the business subject to its liabilities.”

 

RE SLATER

The power of legislation to effect a disturbance in the bequeathment of company shares, provides the footing of a claim against ademption when a testator’s wishes fall victim to the dissolution of an established utility company.

Having taken the steps to leave a specific legacy to his sister in a will drafted little over year before his death, the testator expressed that:

“To Catherine Pontin Slater I bequeath the interest during her life arising from money invested in the following…Lambeth Waterworks Company.”

Unfortunately, eleven months after his declaration had been formalised, Lambeth Waterworks Company was acquired by Metropolitan Water Board under the powers provided for in the Metropolis Water Act 1902, whereupon shareholders were issued Metropolitan stock to the same values as before.

At the point of death, the executors challenged under summons, the existence of the new shares on principle that despite their reassignment, the Lambeth Waterworks Company shares were equally visible, despite the change of form preceding the will’s completion.

The first court disagreed, and referred to the principle of ademption under section 24 of the Wills Act 1837 which reads:

“[E]very Will shall be construed, with reference to the Real Estate and Personal Estate comprised in it, to speak and take effect as if it had been executed immediately before the Death of the Testator, unless a contrary Intention shall appear by the Will.”

This translated that despite the previous reference to Lambeth Waterworks Company and the resulting transferral from Lambeth stock to Metropolitan stock, there could be no correlation between the two sources, other than by the nature of their business.

Upon rejection of the claim, the executors appealed, whereupon the Court considered recent cases, that while supportive in their construction, offered little to uphold a challenge to the clarity provided for by the 1837 Act.

It was for this simple reason that the Court dismissed the appeal and allowed for the shares to lapse into the residual estate, while the court reminded the parties that:

“[Y]ou have to ask yourself, Where is the thing which is given? If you cannot find it at the testator’s death, it is no use trying to trace it unless you can trace it in this sense, that you find something which has been changed in name and form only, but which is substantially the same thing.”

RYMER v STANFIELD

The careful execution of wills and codicils is never truly appreciated until upon dispensation of an estate, the testator/trix’s wishes are forgone in favour of a residual lapse.

On this occasion, the deceased intended to bequeath a considerable sum (at the time) to a specifically named college, in order that the students attending would continue to benefit from a religious education beyond his lifetime. 

As illustrated, the relevant wording requires considerable forethought of specificity, because a failure to do so can prove either contributive or preventative, as was the case here.

When the testator requested that allotted funds were to be granted upon trust to the principal of a St.Thomas’s Seminary for the purposes of funding the attending scholars in their priesthood training, the beneficiary itself was specifically named and the subsequent use of those funds attached to that establishment.

This meant that the court was unable to apply the doctrine of cy-prés, which in turn resulted in a lapse of the gift into the testator’s residual estate.

For clarity, ‘cy-prés’ is a process whereby the courts can act within their capacity to draw inference from the underlying intention of a testator/trix, in order to allow a potentially lapsed gift to pass instead to a charitable organisation or cause similar to the one originally intended.

This judicial measure becomes operative when the designated recipient has ceased to exist upon death and subsequent enactment of a will or codicil.

Where a similar body can be proven to exist, the courts can essentially redirect the funds to that alternative beneficiary, on the proviso that the gift would be used for the ends described in the will. 

Sadly, in the case of Rymer, the exactness of the wording and assigned legacy was such that no legal interception could follow, and thus no application of the above doctrine could stand, while the court reminded the parties that:

“[I]n a bequest where a particular charity appears to be or is named a general charitable intent or an intent extending beyond the limits of the particular institution may be discoverable sufficient to justify the application of the cy-près doctrine.”

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