Legacies - where now?

The Court of Appeal recently handed down its decision in the infamous Gill v RSPCA case.  The court upheld the original decision in favour of Dr Gill leaving the RSPCA with a reported legal bill of over £1.2 million.  The difficulty for fundraisers and legacy officers is how to deal with the situation when a legacy is disputed.

Increased probate disputes

Charities need to be aware that challenges to Wills have become more common. In 2009 the number of contested Wills which reached the High Court increased by 38% compared with the previous year. This reflects the general trend in recent years of an increased number of disputes in this area. Those disputes which reach court are really just the tip of the iceberg.

It is impossible to know how many disputes there are as the vast majority of cases settle well before trial. For every case which reaches trial there are numerous others which reach a negotiated settlement out of court very often following mediation. There have been a number of recent high profile cases reported in the media involving legacies to charities, including Gill v RSPCA.

The increase in probate disputes is due to an amalgamation of factors. Put simply it often makes economic sense for disappointed beneficiaries to dispute a Will.  Despite the current fall in property prices, historical increases mean that overall the value of estates has increased substantially. Increased public awareness of probate disputes has also made litigation more acceptable.

Families are more fragmented now with it being common for people to have had several partners across their lifetime and children from different relationships. This greatly increases the likelihood of family disputes.

The general trend is that we are living longer.  Illnesses associated with old age such as dementia affect a person's capacity to make a valid Will. Sometimes people do disinherit their family, often for good reasons, but they do not always communicate this to their family in their lifetime which often results in a Will being disputed.

Gill v RSPCA

The Gill v RSPCA case is a high profile example of where a legacy to a charity was successfully challenged.  Mr and Mrs Gill were farmers and Dr Christine Gill was their only child. On 27 April 1993 Mr and Mrs Gill signed mirror Wills leaving everything to each other and in default to the RSPCA. The Wills included a declaration that their daughter had been adequately provided for in their lifetimes and therefore they had not provided for her in their Wills.

Dr Gill and her husband had spent significant time over many years helping Mr and Mrs Gill on the farm. Mrs Gill suffered from severe agoraphobia and therefore rarely left the farm.  It was found in court that Mrs Gill was afraid of her husband, who was domineering and easily lost his temper.

Mr Gill died in 1999 and his Estate passed to Mrs Gill. Mrs Gill died in August 2006.  In turn her Estate which was of considerable value was left to the RSPCA.

Dr Gill succeeded in her claim that Mrs Gill's Will was not valid. The High Court held that although Mrs Gill knew and approved of the contents of the Will, it did not represent her true wishes, as she had been overpowered by her husband into making it. Therefore Dr Gill was successful at first instance on the ground of undue influence.

She was also successful on the ground of what is a called proprietary estoppel. Mrs Gill had encouraged Dr Gill to believe that she would inherit the farm and Dr Gill had purchased the adjacent property for this very reason.  It was held in court that Dr Gill had also spent a considerable amount of time working on the farm instead of pursuing her academic career. Thus, the High Court held that even if the Will was valid it would have been unconscionable for Dr Gill not to inherit.

The RSPCA appealed the High Court's decision. The Court of Appeal upheld the decision, but did not agree with the judge's reasoning. The appellant Court held that the High Court judge had been wrong to decide that Mrs Gill had known and approved of the contents of her Will. The Court of Appeal decided that due to Mrs Gill's fragile mental state the evidence suggested that she did not know and approve of the contents of the Will when she signed it. Therefore she did not know or approve of the fact that her Will was benefiting the RSPCA to the exclusion of her daughter.

Given this conclusion it was unnecessary for the Court to go on to consider undue influence. In fact it would have been rather odd for the Court to consider whether Mr Gill had coerced Mrs Gill into making a Will on terms that the Court had already decided that she did not know of or approve.

How can charities reduce the risk of legacy disputes?      

The starting point is that it is often difficult for charities to reduce the risk of probate disputes. Very often the first a charity hears about a legacy is often when they are contacted by the executors.  This is of course, after the person leaving the gift has died.  The family beneficiaries are likely to have a greater knowledge of the circumstances behind the gift.

If a charity is notified by a donor that he or she would like to leave a legacy to them there are things that can be done to help reduce the likelihood of a probate dispute in the future. If the charity feels in a position to, they should encourage the donor to have their Will drawn up by a specialist solicitor, who should keep a good record of their reasons for wanting to benefit the charity on their death. It would be a good idea for the testator to set out their reasons for leaving the legacy to the charity in a letter which should be kept alongside their Will.  This is particularly important if the testator is favouring a charity over family members.

If you consider it appropriate you could encourage the testator to explain to their family why they have drawn up their Will to benefit a charity, so that there are no 'nasty' surprises for their family when they die. If there is a long standing relationship with the charity it may be helpful to document any evidence of this including the testator's involvement, any events they supported, any regular donations and so on.

When legacy disputes arise how should charities manage them?

The Gill v RSPCA case obviously has implications for the charity sector.  It puts the trustees of charities in a difficult position as they are caught between their legal duty to secure assets against the risk of being left with considerable legal costs.  When faced with a legacy that is being challenged, charities must find a balance against the obligation to maximise its assets in relation to the likely prospects of success in the matter. 

Many cases are now referred to mediation.  This is a process whereby the parties will meet to try and reach an agreement to resolve the dispute.  The courts will expect the parties to have attempted mediation and can award costs penalties if one side has refused to enter this process.

It is clear that charities need to consider carefully how to manage a dispute should it arise.  A charity should always be anxious to avoid any negative publicity. One of the benefits of mediation is that both the process itself and any agreement reached will be confidential.

The Charity Commission has said that it is in the process of drafting guidance for trustees involved in litigation.  In the meantime, in order to protect a legacy income, the charities reputation and the balance sheet, legacy disputes need to be handled with the utmost diplomacy and always on a case by case basis. 

For further information, please contact Tony Cockayne, Partner and Head of Disputed Wills & Trusts, at tony.cockayne@michelmores.com or on 01392 688688