What is a Contractual Will Agreement?
A Contractual Will Agreement is not a Will. It is a contract between two living people not to change their Wills.
1. Example of a Contractual Agreement for Wills
Mike leaves everything in his Will to his second wife, Carol. She has her own children. When Mike dies, Carol gets everything. What if she cuts out Mike’s children from her Will? Mike loves his second wife. However, the fear of the unknown keeps him up at night. Fortunately, there is a way to put Mike’s mind at rest. Mike and Carol need a Contactual Will Agreement.
Gloria & Jay have children from previous marriages. They leave everything to each other. When the last dies everything goes to all the children equally. A Contractual Will Agreement contractually protects this.
They build Wills. Whoever dies last leaves half to Mike’s children and half to Carol’s children. They then take the extra precaution of signing a Contractual Will Agreement. The Contractual Will Agreement stops them from cutting out the other’s children. The Contractual Will Agreement stops both of them from changing their Will.
Carol lives another 30 years. This is after Mike dies. Mike’s fear that Carol would cut out his children is justified. After Mike died Carol redid her Will. Carol leaves everything to her own children. She leaves nothing to Mike’s children.
Mike’s children enforce the Contractual Will Agreement. The Court gives half of dead Carol’s assets to Mike’s children. Mike’s children also get back all their legal costs.
2. Example of two single Wills leaving nothing to spouse: Mike leaves nothing to his second wife. He leaves everything to his children of the first relationship. Carol, his second wife does the same.
They can still sign a Contractual Will Agreement. All the Contractual Will Agreement is, is just an agreement to not change the intent of your Wills. What is in the Wills is not relevant to the validity of a Contractual Will Agreement. (Although, in this instance, you would not need a Contractual Will Agreement because neither party cares whether the other left the assets to their own children, or not!)
3. Example of two single Wills leaving a bit to the second spouse: Mike leaves 25% to his new wife, Carol. The rest goes to his children. Carol leaves 1/3rd to Mike, 1/3rd to her favourite charity and 1/3rd equally to her two children.
You can build a Contractual Will Agreement to lock in the intent of those two Wills. The fact that each other are not leaving everything to each other is not relevant to the validity of a Contractual Will Agreement.
As you can see, you can ‘cut the cake’ as you see fit. Whatever your Wills state can not now be challenged by your spouse, once both of you have attached the two Wills to the Contractual Wills Agreement. And the Contractual Will Agreement is signed by both of you.
Let’s say the Will maker is currently married or in a de facto relationship. But they have children from a prior relationship. In this instance, their Will presents a challenge.
If they are independently wealthy, there may be no problem in each of them leaving their assets to their respective children and leaving nothing to the surviving spouse. This is because the surviving spouse has sufficient assets to provide for themselves during their lifetime.
In that case, they each build their own single 3-Generation Testamentary Trusts Will along those lines. (All to their own children.) They then attach these Wills to a Contractual Will Agreement. Neither can now challenge the Will when the first dies.
However, what if your second spouse lacks sufficient wealth to live comfortably after you die? You are obliged to make proper and adequate provision from your estate. The obligation gets greater the longer you are together.
If you fail to provide then your estate risks a family provision application in the Courts. This is where your Will is rewritten by the Court.
A Contractual Will Agreement stops your spouse from challenging your Will. A ‘Considered Person Clause‘ should also be put in your Will.
Q: I have two children…
If I die first, I want my 100% share to go to my current wife Melanie. And when she dies I want Jake and Lisa to get 50% each.
But, Jake is not her child. How can I make sure that Melanie, ‘honours’ my wishes?
If Melanie dies first, everything goes to me. But how can my current wife Melaine be confident that upon my death my Will continues to give half to my son Jake and the other half to our joint daughter Lisa?
A: This is the exact reason you need a Contractual Will Agreement.
It is right and proper that you leave everything to Melanie. She may need all of your wealth to live a good end of life experience. Quality nursing homes and the like. And the same for you. You need all of Melanie’s money so that you can live a wonderful life with high-quality nursing and hospital support.
Mums and dads need every cent they have to get a good end-of-life experience.
In Singapore, you get 3 or 4 servants in your home for less than AUS$50k per year. In Australia, such ‘extravagance’ sets you back AUS$300k per year.
Servants and 24-hour nursing staff in your home, or in a 5-star nursing home are expensive.
This is how you achieve what you want:
Q: We are building a Contractual Will Agreement. We filled in and saved the “you and your spouse details” section. But we cannot work out where to fill the actual details of the contract. The next step is “reference” then “summary” then “lock and build”.
A: That is correct. We do not need any more information. You are welcome to look at the full Sample. It shows in full both our covering letter and the Contractual Will Agreement. As you will see the agreement is basically saying:
Here is my unsigned Will. Here is your unsigned Will. I agree and you agree not to change those documents.
This Agreement is a document between two people. This is often a husband and wife who each have children from prior relationships. They make Wills and want to ensure that their partner who survives them keeps their part of the bargain.
The courts honour these Agreements:
“a contract between persons to make corresponding wills gives rise to equitable obligations when one acts on the faith of such an agreement and dies leaving his will unrevoked so that the other takes property under its dispositions. It operates to impose upon the survivor an obligation regarded as specifically enforceable. It is true that he cannot be compelled to make and leave unrevoked a testamentary document and if he dies leaving a last will containing provisions inconsistent with his agreement it is nevertheless valid as a testamentary act. But the doctrines of equity attach the obligation to the property. The effect is, I think, that the survivor becomes a constructive trustee and the terms of the trust are those of the will which he undertook would be his last will.” Birmingham v Renfrew [1937] HCA 52
The surviving partner is allowed to consume the assets but can’t give them away or waste them. They can’t act with the intention of defeating the agreement.
Your Contractual Will Agreement is not a Will. It is an agreement that you sign to say that you will not change your Will. You merely staple your and your spouse’s unsigned copies of your Wills to the back of the Legal Consolidated Contractual Will Agreement.
A Will only comes into effect at the moment of your death. In contrast, your Contractual Will Agreement comes into effect the moment that you sign it – while you are still alive.
A Contractual Will Agreement can no longer be rescinded once:
a) one of the parties can no longer change the Will (e.g. unsound mind), or
b) one of the parties die
While your partner is able to change their Will, then you notify them that you no longer want to be bound by the Contractual Will Agreement. Provided your partner has time and the ability to do so then your partner is free to make a new Will. This is without the constraints of the Contractual Will Agreement.
So if your partner is in a coma then it is too late to renounce the Contractual Wills Agreement. You are bound by it. This is because your partner does not have the ability to change their Will. This is because your partner is in a coma.
If your partner is dead then you obviously cannot revoke the Contractual Will Agreement. And you cannot change your Will either.
If your partner is of unsound mind then they cannot make a new Will. Therefore, you cannot renounce the Contractual Will Agreement.
If the surviving party changes their Will following the death of the first Will maker then they commit fraud and breach of contract. They accepted the benefit of the contract. But they did not accept the burden attached to the contract.
What happens if you change your Will in breach of the Contractual Will Agreement? The beneficiaries under the original Will (e.g. your stepchildren) bring an action against you, the surviving party. This is to enforce the Contractual Will Agreement.
A couple marries who both have been married before. Each of them has two adult children. They contractually agree that in their wills, they leave their estate to each other and the survivor leaves his or her estate to the four children equally.
One dies and the deceased’s children challenge the Will under the Family Provisions Legislation. Which prevails: the Contractual Will Agreement or the court challenge?
In Dillon v Public Trustee of New Zealand in 1941, the Court decided that property the subject of such a contract was available to meet an order under such legislation. But in Schaefer v Schuhmann in 1972, the Court decided that it was not. In Barns v Barns in 2003, the High Court of Australia decided to reject Schaefer and to follow Dillon. So challenging a Will can, currently, override the Contractual Will Agreement. However, these Wills did not have a Considered Person Clause in the Wills. If they had the outcome may have been different.
Yes. You can have two single Wills or Mutual Wills. Both work.
Example One – two single Wills: Mavis leaves everything to her children of her first relationship. Her second husband John is leaving everything to his child, also of a previous relationship. They build two separate single Wills to reflect that. They attach those two separate Wills to the Contractual Will Agreement.
Example Two – Mutual Wills: By definition mutual Wills leave everything to each other, in the first instance. Ken and Muriel, after they both die, are leaving 50% to Ken’s children and the other 50% to Muriel’s children. Mutual Wills are two Wills that are mirror images of each other. They attach those mutual Wills to the Contractual Will Agreement.
That is fine. The Contractual Will Agreement is a standalone document. Legal Consolidated does not need to have prepared the Wills for the Contractual Will Agreement.
And it does not matter that the Wills were signed many years apart from each other and prepared by two different law firms.
That is fine. What is in your Wills is not relevant. They do not need to be ‘mutual’ or ‘mirror’ Wills. All you are doing, as you correctly point out, is agreeing not to change your Wills.
For a Contactual Will Agreement:
Question: Instead of the ‘unsigned’ Wills, why can’t we just make a copy of the signed Wills and staple them to the Contractual Will Agreement?
Answer: You can do that. That is equally as legal. However, there are two problems that may come about. Firstly, if you start writing with a pen on the copies of the signed Wills it may be argued that they are now the new Wills. Secondly, people sometimes wrongly staple the actual original Will to the Contractual Will Agreement! This damages the original Wills and may render them void.) It is simpler and less chance for error if you just staple unsigned copies of your Wills to the Contractual Will agreement.
A blended family for estate planning is one in which a Will maker or the spouse of the Will maker is involved in a previous relationship. And children are born from that previous relationship.
Examples of blended families:
We use the expression “Mutual Will” and “Mirror Will” interchangeable. They are the same thing. E.g.
Can you see the pattern? They each leave everything to each other in the first instance. If you are not doing that then you do not have ‘Mutual’ or ‘Mirror’ Wills.
Whether you use the expression Mirror Wills or Mutual Wills, you need a specific agreement that the terms of the Wills are binding on the parties. And that the intent of the Wills can not be changed.
With these types of Wills there is a lot of trust that the last to die, with ‘do the right thing’ and not change the intent of the Wills. To help that ‘trust’ build and sign a Contractual Will Agreement.
You may argue that ‘Mutual Wills’ contain an implied promise. But that is not correct. Instead, sign a “Contractual Will Agreement” to protect the intent of the Wills.
Hussey v Bauer [2011] QCA 91 shows that Mutual Wills can, sadly, be changed after the first person dies:
“The characteristics of Mutual Wills and the means of proving their existence have been the subject of consideration in many courts. It is possible to draw from those authorities the following principles:
(a) Mutual Wills arise when two persons agree to make Wills in particular terms and agree that those Wills are irrevocable and that they will remain unaltered.
(b) Substantially similar, even identical, Wills are not Mutual Wills unless there is an agreement that they not be revoked. [Italics by Legal Consolidated.]
(c) The mere making of Wills simultaneously and the similarity of their terms are not enough taken by themselves to establish the necessary agreement.”
The case confirms that you need an actual contract. This is called a Contractual Will Agreement. It is not a Will. It is merely a contract not to change your Will. After you die (or get dementia) your partner can no longer change their Will.
A Contractual Will Agreement is not a Will. It is a legally binding contract between two people where:
The Contractual Will Agreement guarantees that property flows to the agreed and intended beneficiaries. For say a blended family, the surviving Will maker cannot disinherit their step-children following the death of the first spouse. For example, if half goes to your children and half goes to your stepchildren then that is now set in concrete.
The courts are committed to the position that the right to change one’s Will is limited by a contractual arrangement with your spouse. Therefore, the contractual Will agreement is irrevocable and binding on the other party when you die.
A Contractual Will Agreement is a ‘contract’. An Australian contract needs a number of conditions. These include being over 18 years of age, acting with free will and knowledge etc…
Another requirement is ‘consideration’. There must be a ‘bargain’. I am giving something up to get something. You are giving something up to get something.
A Contractual Will Agreement is a mutual promise. The parties ‘give up’ the right to change their Will. They get a promise from the other for the other to also not change their Will. This is adequate consideration.
Further, to put the matter beyond doubt, Legal Consolidated structures your Contractual Will Agreement as a “Deed”. A Deed does not require consideration.
It may come down to terminology.
As my article suggests to ensure there is a binding agreement you need a “Contractual Will Agreement”. This is sometimes called by other lawyers “Mutual Wills”. Either way, you need an ‘agreement’. Or an ‘understanding’ that you can not change your Will, or at least the intent of the Will.
In contrast ‘leaving everything to each other then everything to the same people’ is not, in my view, automatically a contractual agreement. Other things would need to happen, perhaps an exchange of emails or a statement may make it a verbal contract.
As my article further states even a Contractual Will Agreement can be annulled if one party tells the other they are no longer bound – this is provided the other party can now change their Will (ie. has mental capacity). So as to your actual example, I do not think it was a contract between the Will makers. But even if it was it would be annulled by a change of circumstances.
Consider the case of Forster v Forster [2022] QSC 30.
There is a Contractual Mutual Will in place. This is where the now-dead person and the surviving spouse had agreed to give their residuary estates to each other. This is to allow the survivor to maintain a similar lifestyle.
The survivor is contractually bound to maintain a Will which gifts their residuary estate equally between the deceased’s children and the survivor’s children.
The applicant in the case is one of the dead person’s children. As is common, the child does not like his stepmother.
The child wants his stepmother to disclose all of her personal assets and liabilities. He wants that information now. And he wants the information each year.
The stepmother fights back against the disclosure. But agrees to the terms of the Mutual Contractual Will Agreement. She has to do this anyway, so it is no great concession on her part.
The son seeks an order under section 8 Trust Act 1973 (Qld).
Her Honour did not find a single authority that supported the son’s argument. She refuses the application. The case is set out below.
On the last page of all our documents, we ask you to name your document. Or, rather put in a reference. This is predominantly for lawyers, accountants and financial planners that may have built 100s of documents on our website and may need to find them from time to time. Their reference may look like: bkd:dk:38383:3838
But you can put in any reference you wish. Mum and dads may call the document after themselves. For example, John and Wilma Smith Contractual Will Agreement.
But most people just put in the name of the document: Contractual Will Agreement
Put in any wording that you wish.
You can answer this question as you wish. Most lawyers only like their own logo on the legal document. So most law firms building documents on our website will remove the Legal Consolidated logo.
It is your call.
You are welcome to do as you wish. But there is no legal requirement to do so.
A Legal Consolidated Contractual Will Agreement, in compliance with Forster v Forster:
Q: I’m building the Estate Planning bundle (3-Generation Testamentary Trust Mutual Wills and 4 POAs) for my parents.
I accept that almost 100% of the Wills drafted in Australia leave everything to each other. And then everything to the children equally once both parents are dead.
However, I have friends burned by mum leaving everything to dad. And then dad re-partners. Dad:
How can my mum leave everything to dad in the first instance but dad guarantees that everything goes to his children and not some gold digger?
I know Contractual Will Agreements are common for second marriages. But does a Contractual Will Agreement also work for first marriages?
A: You are correct. The Contractual Will Agreement is common for second marriages. This is because mum owes her love to two groups of people: her new husband and her own children. Her second husband also has two divided loyalties: his new wife and his own children.
But in a first marriage where there are children only of that marriage then there is no divided loyalty. Dad leaves everything to Mum. Mum leaves everything to Dad. Once they are both dead everything goes to the children equally. I agree with you. Pretty much everyone structures their Mutual Wills that way. It is so common that our Mutual Wills only operate that way.
Contractual Will Agreements for first marriages are rarer. But they operate for any couple. There is nothing stopping your parents from building an additional document called a Contractual Will Agreement. But they need to have built their Wills first.
CITATION: | Forster v Forster [2022] QSC 30 |
PARTIES: | JAMES DERWENT CAMPBELL FORSTER (applicant) v ANNABEL LISA FORSTER (respondent) |
FILE NO/S: | BS No 12687 of 2021 |
DIVISION: | Trial Division |
PROCEEDING: | Application |
ORIGINATING COURT: | Supreme Court at Brisbane |
DELIVERED ON: | 8 March 2022 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 7 December 2021; final written submissions received 9 February 2022 |
JUDGE: | Ryan J |
ORDER: | The application is refused. I will hear the parties as to costs. |
CATCHWORDS: | SUCCESSION – MAKING OF A WILL – TESTAMENTARY INSTRUMENTS – JOINT AND MUTUAL WILLS – where deceased and his wife had each been married before – where each had children from their previous marriage – where deceased and his wife executed a mutual wills agreement in which they agreed to execute “mutual wills”, leaving their property first to their survivor absolutely, and then, upon the survivor’s death, to their five children/step-children in equal shares – where deceased’s wife inherited most of his estate in accordance with his (mutual) will – where it is not alleged that the deceased’s wife has breached, or will breach, the terms of the mutual wills agreement – where the deceased’s wife’s step-son seeks an order requiring her to account to him for her assets during her lifetime – whether the deceased’s wife holds the property, the subject of the mutual wills agreement, as constructive trustee for her children and step-children – whether court should make an order under section 8 of the Trusts Act 1973 (Qld) requiring the deceased’s wife to disclose her financial position to her step-son on a yearly basisTrusts Act 1973 (Qld), section 8Barns v Barns and others (2003) 214 CLR 169Bauer & Ors v Hussey & Anor [2010] QSC 269Birmingham & Others v Renfrew & Others (1937) 57 CLR 666Dufour v Pereira (1769) 1 Dick 419; 21 ER 332Flocas v Carlson and others [2015] VSC 221Gordon Archibald Bigg v Queensland Trustees Limited Unreported, N0 825 of 1989Lord Walpole v. Lord Orford (1797) 3 Ves. 402Palmer v Bank of New South Wales (1975) 133 CLR 150Re Basham [1986] 1 WLR 1498Re Cleaver, decd. [1981] 1 WLR 939Re Dale (decd) [1993] 4 All ER 129Re Goodchild (deceased); Goodchild and another v Goodchild [1996] 1 All ER 670Re Hagger [1930] 2 Ch 190, cited in ‘Mutual Wills’ paperSchaefer v Schuhmann and Others (1972) 46 ALJR 82 (Privy Council |
COUNSEL: | I Klevansky for the applicant C A Brewer for the respondent |
SOLICITORS: | The Estate Lawyers for the applicant Holding Redlich for the respondent |
OVERVIEW
and, if so,
and, if so,
Background
The parties desire to make Wills each providing entirely for the other on the first of them to die but on the second of them to die to ensure that as far as possible (subject to extenuating circumstances) all five children of both of them are treated equally with regard to the residue of the Estate.
Each of the parties agrees that upon the death of the other and having inherited the Estate of the other:
The deceased’s will
I DECLARE that no provision is made in this Will for my son JAMIE and my daughters LUCY and SARAH (in the event that ANNABEL shall survive me), other than the provisions of clauses 3 and 4 of my Will because my Will is made as a mutual Will with the Will of ANNABEL to the intent that both ANNABEL and I will make provision in our Wills for both My Children and Annabel’s Children to take effect on the death of the survivor of us pursuant to an Agreement signed by myself and ANNABEL on this day which provides for an equal distribution of the residue of our Estates and (per stirpitally) among My Children and Annabel’s Children subject to the provisions of that Agreement to take effect on the death of both or of the survivor of us.
Lead up to the present application
Parties’ arguments
8 Application to court to review acts and decisions
trust does not include the duties incidental to an estate conveyed by way of mortgage, but with that exception trust extends to implied, resulting, bare and constructive trusts, and to cases where the trustee has a beneficial interest in the trust property, and to the duties incidental to the office of a personal representative.
Preliminary discussion
Issues raised in this application and James’ authorities – overview
Analysis of the authorities upon which James relied
Dufour v Pereira (1769) 1 Dick 419; 21 ER 332
102 Having been referred to civil law authority to the effect that notwithstanding the execution of such a document, in their lifetimes joint testators may in secret make a new will, his Lordship indicated that the English law could not be so:
The law of these countries must be very defective, and totally destitute of the principles of equity and good conscience: for nothing can be more barbarous than a law, which does permit in the very text of it one man to defraud another.
The equity of this court abhors the principle.
103 His Lordship then set out the principles that he saw as governing the operation of mutual wills under English law:
A mutual will is a mutual agreement.
A mutual will is a revocable act. It may be revoked by joint consent clearly [and] by one only, if he give notice, I can admit.
But to affirm, that the survivor (who has deluded his partner into this will upon the faith and persuasion that he would perform his part) may legally recall his contract, either secretly during their joint lives, or after at his pleasure, I cannot allow.
The mutual will is in the whole and in very part mutually upon condition, that the whole shall be the will. There is a reciprocity, that runs throughout the instrument. The property of both is put into a common fund, and every devise is the joint devise of both.
This is a contract.
104 The focus, for Lord Camden, was on Camilla’s right to revoke the joint will, as is apparent from the following passages:
If not revoked during the joint lives by any open act, he that dies first dies with the promise of the survivor, that the joint will shall stand. It is too late afterwards for the survivor to change his mind, because the first dier’s will is then irrevocable, which would otherwise have been differently framed, if that testator had been apprised of this dissent.
Thus is the first testator drawn in and seduced by the fraud of the other, to make a disposition in his favour, which but for such a false promise he would never have consented to.
105 Lord Camden also considered an argument put by Camilla’s daughter that the parties, knowing that wills by their very nature are revocable instruments, could not have intended a promise not to revoke:
It was argued however, that the parties, knowing that all testaments were in their nature revocable, were aware of this consequence, and must therefore be presumed to contract upon this hazard.
There cannot be a more absurd presumption than to suppose two persons, while they are contracting, to give each licence to impose upon the other.
Though a will is always revocable, and the last must always be the testator’s will, yet a man may so bind his assets by agreement, that his will shall be a trustee for performance of his agreement.
106 According to Lord Camden, there was no relevant difference between a contract to dispose of assets by will in a certain fashion, and a contract not to revoke a will already disposing of assets. Both would be enforced, not by operation of the will, but by performance of the agreement:
The court does not set aside the will, but makes the devisee heir or executor trustee to perform the contract.
107 His Lordship then referred to three existing cases to the effect that, where in return for a promise by a testator to make (or leave) a certain party as executor, that executor promised to pay certain legacies:
This court bound the will with the promise, and raised a trust in the devisee.
The act done by one is a good consideration for the performance of the other.
This case stands upon the very same principles.
The parties by the mutual will do each devise, upon the engagement of the other, that he will likewise devise in a manner therein mentioned.
108 His Lordship then considered how such an agreement must be proved:
The instrument itself is the evidence of the agreement; and he, that dies first, does by his death carry the agreement on his part into execution. If the other then refuses, he is guilty of a fraud, can never unbind himself, and becomes a trustee of course. For no man shall deceive another to his prejudice. By engaging to do something that is in his power, he is made a trustee for the performance, and transmits that trust to those that claim under him.
This court is never deceived by the form of instruments.
The actions of men here are stripped of their legal clothing, and appear in their first naked simplicity.
Good faith and conscience are the rules, by which every transaction is judged by this court, and there is not an instance to be found since the jurisdiction was established, where one man has ever been released from his engagement, after the other has performed his part.
109 Finally, Lord Camden conceded he may have ‘given myself more trouble than was necessary’, concluding that by probating the mutual will, and taking the benefit under the will, Camilla was estopped from denying that the mutual will bound her.
The defendant Camilla Rancer hath taken the benefit of the bequest in her favour by mutual will; and hath proved it as such; she hath thereby certainly confirmed it; and therefore I am of the opinion, the last will of the wife, so far as it breaks in upon the mutual will is void.
And declare, that Mrs. Camilla Rancer having proved the mutual will; after her husband’s death; and having possessed all of his personal estate, and enjoyed the interest thereof during her life, hath by those acts bound her assets to make good all her bequests in the said mutual will; and therefore let the necessary accounts be taken.
Birmingham & Others v Renfrew & Others (1937) 57 CLR 666
… The law was stated with robust simplicity in 1769 by Lord Camden in Dufour v Pereira, where, speaking of a mutual will made by husband and wife he said: “It might have been revoked by both jointly; it might have been revoked separately, provided the party intending it, had given notice to the other of such revocation. But I cannot be of opinion, that either of them, could, during their joint lives, do it secretly; or after the death of either, it could be done by the survivor by another will. It is a contract between the parties, which cannot be rescinded, but by the consent of both. The first that dies, carries his part of the contract into execution. Will the court afterwards permit the other to break the contract? Certainly not.” In that case it was declared that the wife, “having possessed all his personal estate, and enjoyed the interest thereof during her life, hath by those acts bound her assets to make good all her bequests in the said mutual will; and therefore let necessary accounts be taken”. This case was very fully discussed in Hargrave’s Juridical Arguments (1799) vol. ii., and what that learned author has said has been recognised as law on a number of occasions and as applying to cases of separate wills made by two persons. I have already referred to Gray v Perpetual Trustee Co. See also Stone v Hoskins, where the following passage is quoted from Hargrave: “Though a will is always revocable, and the last must always be the testator’s will; yet a man may bind his assets by agreement that his will shall be a trustee for performance of his agreement. … These cases are common, and there is no difference between promising to make a will in such a form and making a will with a promise not to revoke it. This court does not set aside the will; but makes the devisee heir or executor trustee to perform the contract.” …
… Upon the basis of the law as declared in the authorities mentioned and upon the finding of fact made by the learned judge, an order was made declaring that Grace Alexandra Russell entered into the alleged agreement as trustee for and on behalf of the plaintiffs and that the agreement is binding upon and enforceable against the executors of the husband. In my opinion this order is appropriate in it terms.
… It has long been established that a contract between persons to make corresponding wills gives rise to equitable obligations when one acts on the faith of such an agreement and dies leaving his will unrevoked so that the other takes property under its dispositions. It operates to impose upon the survivor an obligation regarded as specifically enforceable. It is true that he cannot be compelled to make and leave unrevoked a testamentary document and if he dies leaving a last will containing provisions inconsistent with his agreement it is nevertheless valid as a testamentary act. But the doctrines of equity attach the obligation to the property. The effect is, I think, that the survivor becomes a constructive trustee and the terms of the trust are those of the will which he undertook would be his last will …
“ … the simple question is, whether a court of equity shall suffer this breach of the compact to be available: or whether, under its jurisdiction of compelling specific performance, the court shall not declare the earl’s devisees deriving under a breach of contract to be mere trustees for those against whom that breach operates.”
“… [T]he plain inference seems to be, that compacts or agreements, upon the faith of which wills or settlements are either made or forborne to be made, are enforceable by both jurisdictions: and that as at law damages are recoverable by those injured by the breach; so in equity a more perfect relief is given, by decreeing specific performance, and for that purpose, whenever the case requires converting the party promising and all volunteers deriving under him into mere trustees of the property in question. So anxious also do our courts of equity appear to have been in exacting the performance of such compacts, that even verbal promises have had enforcement; the Statute of Frauds having been refined upon, to prevent the requisition of writing from operating; and entering into such engagements and then refusing to perform them having for that purpose been classed, as a fraud upon the testator or other party influenced in his conduct by the particular promise” …
It is true that they date from a period when neither at law or in equity was the view firmly applied that no one but a party to a contract could enforce it. Indeed this proposition never became true in equity; for, if a contracting party made himself trustee for others of the benefit of the obligation and it was a contract enforceable by equitable remedies, then the beneficiaries of the trust could obtain those remedies on a properly framed suit in which the contracting party so making himself a trustee was joined. Since the Judicature Act, it is possible for the beneficiaries of a purely legal chose in action to enforce it in a similar manner … But in a contract for corresponding or “mutual” wills, the equities arise from a combination of circumstances. In the first place, the obligations of the survivor under such a contract have always been regarded as enforceable in Chancery. Necessarily the remedy could not be the same as that by which executory contracts are specifically performed. In such cases the party is compelled to carry out his contract according to its tenor. But the relief was specific and was framed to bring about the result intended by the contract.
It must not be forgotten that Lord Thurlow was able to say (Legard v Hodges) that it was a maxim which he took to be universal that “wherever persons agree concerning any particular subject, that in a court of equity as against the party himself, and any claiming under him voluntarily or with notice, raises a trust.” The application of this view to contracts for “mutual” or corresponding wills is affected by the second of the considerations to which I have referred as combining to give rise to the equities in question. That consideration consists in the death of one of the parties leaving a will in the form agreed. The result is a disposition of property made upon the faith of the survivor’s carrying out the obligations of his contract. It is an element which brings such a case under the equitable jurisdiction for the prevention of fraud. The best known example of fastening equities upon property because of a testamentary disposition made in reliance upon an understanding or promise is that which is very clearly stated by Lord Warrington in Blackwell v Blackwell:- “It has long been settled that if a gift be made to a person or persons in terms absolutely but in fact upon a trust communicated to the legatee and accepted by him, the legatee would be bound to give effect to the trust, on the principle that the gift may be presumed to have been made on the faith of his acceptance of the trust, and a refusal after the death of the testator to give effect to it would be a fraud on the part of the legatee …
Of this rule, Lord Westbury says in McCormick v Grogan:- “The jurisdiction which is invoked here by the appellant is founded altogether on personal fraud. It is a jurisdiction by which a court of equity, proceeding on the ground of fraud, converts the party who has committed it into a trustee for the party who is injured by that fraud.” A little later, he says: “And if an individual on his deathbed, or at any time, is persuaded by his heir-at-law, or his next of kin, to abstain from making a will, or if the same individual, having made a will, communicates the disposition to the person on the face of the will benefited by that disposition, but, at the same time, says to that individual that he has a purpose to answer which he has not expressed in the will, but which he depends upon the disponee to carry into effect, and the disponee assents to it, either expressly, or by any mode of action which the disponee knows must give to the testator the impression and belief that he fully assents to the request, then undoubtedly, the heir-at-law in the one case, and the disponee in the other, will be converted into trustees, simply on the principle that an individual shall not be benefited by his own personal fraud”.
There is a third element which appears to me to be inherent in the nature of a contract or agreement, although I do not think it has been expressly considered. The purpose of an arrangement for corresponding wills must often be, as in this case, to enable the survivor during his life to deal as absolute owner with the property passing under the will of the party first dying. That is to say, the object of the transaction is to put the survivor in a position to enjoy for his benefit the full ownership so that, for instance, he may convert it and expend the proceeds if he choose. But when he dies he is to bequeath what is left in the manner agree upon. It is only by the special doctrines of equity that such a floating obligation, suspended, so to speak, during the lifetime of the survivor can descend upon the assets at death and crystallise into a trust. No doubt gifts and settlements, inter vivos, if calculated to defeat the intention of the compact, could not be made by the survivor and his right of disposition, inter vivos, is not unqualified. But, substantially, the purpose of the arrangement will often be to allow full enjoyment for the survivor’s own benefit and advantage upon condition that at his death the residue shall pass as arranged.
In In re Oldham Astbury J pointed out, in dealing with the question whether an agreement should be inferred, that in Dufour v Pereira the compact was that the survivor should take a life estate only in the combined property. It was therefore easy to fix the corpus with a trust as from the death of the survivor. But I do not see any difficulty in modern equity in attaching to the assets a constructive trust which allowed the survivor to enjoy the property subject to a fiduciary duty which, so to speak, crystallised upon his death and disabled him only from voluntary dispositions inter vivos. On the contrary, as I have said, it seems rather to provide a reason for the intervention of equity. The objection that the intended beneficiaries could not enforce a contract is met with the fact that a constructive trust arises from the contract and the fact that testamentary dispositions made upon the faith of it have taken effect. It is the constructive trust and not the contract that they are entitled to enforce.
Schaefer v Schuhmann and Others (1972) 46 ALJR 82 (Privy Council)
I accept that where A covenants to bequeath property to B, A’s personal representative will generally be constructive trustee of the property for B, and the law (as developed in courts of equity) will generally compel the personal representative to do what the deceased should himself have done.
Gordon Archibald Bigg v Queensland Trustees Limited Unreported, No 825 of 1989
[I]t might be expected that, in a case where a mutual will was during joint lives revoked by one party without notice to the other, the equitable principle would also impose a trust on the estate of the deceased for the benefit of the survivor …
It is no doubt because the necessary notice of revocation is no longer capable of being given by either party after one of them has died that it is considered also to be inequitable to permit the survivor to revoke after the death of the other party. But it is not correct to say that is the sole ground for equitable intervention, or that it disappears because, in a case like the present, the survivor has discovered after the death of the other party that during joint lives he or she revoked his or her mutual will without notice to the survivor …
I therefore consider that she, or those who benefit from her estate, must be held to the agreement that she made. That can be done by declaring that, after discharging her liabilities and funeral and testamentary expenses, and costs, the defendant as her executor hold the estate of Karleen Juanita Bigg on trust for the plaintiff …
Re Goodchild (deceased); Goodchild and another v Goodchild [1996] 1 All ER 670
From Re Dale at 132 (my emphasis):
“The doctrine of mutual wills is to the effect that where there are two individuals who have agreed as to the disposal of their property and have executed mutual wills in pursuance of the agreement, on the death of the first (T1) the property of the survivor (T2), the subject matter of the agreement, is held on an implied trust for the beneficiary named in the wills. The survivor may thereafter alter his will, because a will is inherently revocable, but if he does his personal representatives will take the property subject to the trust.”
From Re Cleaver decd at 1024 (my emphasis):
“The principle of all these cases is that a court of equity will not permit a person to whom property is transferred by way of gift, but on the faith of an agreement or clear understanding that it is to be dealt with in a particular way for the benefit of a third person, to deal with the property inconsistently with that agreement or understanding. If he attempts to do so after having received the benefit of the gift equity will intervene by imposing a constructive trust on the property which is the subject matter of the agreement or understanding.”
The rest of the judgment … emphasises more than once that there is a contract between the testators which, on the death of the first testator, is carried into effect by him, that the first testator dies with the promise of the second testator that the agreement will stand, and that it would be a fraud on the first testator to allow the second testator to disregard the contract which became irrevocable on the death of the first testator. In my judgment the essence of the decision is that contained in the passage on p. 310:
“he, that dies first, does by his death carry the agreement on his part into execution. If the other then refuses, he is guilty of a fraud, can never unbind himself, and becomes a trustee of course. For no man shall deceive another to his prejudice.”
It is also clear from Birmingham and Renfrew … that these cases of mutual wills are only one example of a wider category of cases, for example secret trusts, in which a court of equity will intervene to impose a constructive trust. A helpful and interesting summary of that wider category of cases will be found in the argument of Mr Nudgee in Ottaway v Norman … The principle of all of these cases is that a court of equity will not permit a person to whom property is transferred by way of a gift, but on the faith of an agreement or clear understanding that it is to be dealt with in a particular way for the benefit of a third person, to deal with that property inconsistent with that agreement or understanding. If he attempts to do so after having received the benefit of the gift equity will intervene by imposing a constructive trust on the property which is the subject of the agreement or understanding.
Barns v Barns and others (2003) 214 CLR 169
The issue is this: when a testamentary provision is made pursuant to a legal obligation on the part of the testator, is the property the subject of that provision available as part of the estate which may be redistributed under the Act?
[78] Undoubtedly, whilst the nature and content of trust and contract are distinct, there is no dichotomy between them. Thus, as Mason and Deane JJ pointed out in Gosper v Sawyer: “the trust, particularly the resulting and constructive trust, represents one of the most important means of protecting parties in a contractual relationship and of vindicating contractual rights”. That statement has an added significance as an illustration of a fundamental point made by Viscount Radcliffe in Commissioner of Stamp Duties (Q) v Livingston when he said: “Equity in fact calls into existence and protects equitable rights and interests in property only where their recognition has been found to be required in order to give effect to its doctrines”.
[79] The submission of the first respondent appears to involve alternative possibilities. The first is that the Deed on its proper construction was an immediate declaration of trust binding the assets of the two testators. The second assumes that there was no immediate effective declaration of trust but posits subsequent equitable intervention by reason of unconscientious conduct. Neither proposition should be accepted.
[80] There is no substance in a submission by which the relations between the parties to the Deed were translated from the level of contract to that of trust so as to bind the property of Mr Barns forthwith and in advance of his death. In Central Trust and Safe Deposit Company v Snider, Lord Parker of Waddington, for the Judicial Committee, said:
“A contract to devise a beneficial interest assumes an estate in the person who contracts sufficient to enable the contract to be performed, and it would be contrary to ordinary equitable principles to construe a promise to settle as a present declaration of trust.”
[81] The answer to the second alternative depends upon somewhat different considerations. One concern of the doctrines of equity was to “enlighten and control the common law”, as Deane J put it in Muschinski v Dodds; his Honour added:
“The use or trust of equity, like equity itself, was essentially remedial in its origins. In its basic form it was imposed, as a personal obligation attaching to property, to enforce the equitable principle that a legal owner should not be permitted to use his common law rights as owner to abuse or subvert the intention which underlay his acquisition and possession of those rights.”
[82] However, in the present case, the essential obligation imposed upon Mr Barns was the negative stipulation in cl 3.3 of the Deed not to revoke his will without the written consent of Mrs Barns and Mr Malcolm Barns. There was no use or apprehended use of Mr Barns’ statutory right or power … to revoke his will. There was no unconscientious conduct which might enliven equitable intervention to enforce by any doctrine or remedy of equity the contractual negative stipulation found in the Deed. What happened was that Mr Barns observed his obligations under the Deed and his will took effect according to its terms.
The reference by Dixon J to a floating obligation which crystallises invites comparison with a floating charge. It is well established that effect can readily be given to the latter. Until the occurrence of certain defined events the owner of [the charged] assets may deploy them generally as he deems fit, subject to the covenants in the instrument of charge, and not deliberately in such a way as to destroy or diminish the value or utility of the rights and interests of the person in whose favour the charge is created. In the same way, a “floating obligation” or a “constructive trust” of the kind contemplated by Dixon J may, and should be given concrete effect by crystallisation to, and for the benefit of the promisees under the agreement for mutual wills on the death of the surviving mutual contractor. The fact that the surviving contracting party, who is the beneficiary under the will of the first of the two to die, may use, and indeed even ultimately use up in their entirety the assets passing under the first will, provides a reminder that in human affairs, even legal affairs, complete effectuation of intention are sometimes not possible. That is not a reason for the court not to give as much effect as possible to the intentions of the parties. What the second testator may not do as Dixon J points out, is diminish or devalue the first testator’s estate by acts calculated to produce that result.
Bauer & Ors v Hussey & Anor [2010] QSC 269
… [W]here one party to a mutual wills agreement dies leaving his or her will unrevoked, relying on the other party to observe the terms of the agreement, equity will treat the agreement as irrevocable and will not permit the surviving party to deal with the subject property in a way contrary to the agreement or understanding.
Mutual Wills: Are they still relevant today? Paper by Justice Rene Le Miere, of the Supreme Court of Western Australia, delivered to the Society of Trust and Estate Practitioners on 16 May 2019
[10] Before the binding event occurs, usually the death of the first testator, the mutual wills agreement is a contractual agreement; the consideration taking the form of mutual promises. When the binding event occurs, equity imposes a constructive trust over the property covered by the arrangement. This does not prevent the survivor revoking his will or making a new will – a will is always revocable. But the executors of the new will take the survivor’s property subject to the trust.
In Flocas v Carlson, McMillan J pointed out that the mutual wills agreement is a contract and the floating obligation is an obligation that must be determined by reference to the express and implied terms of that contract [Footnote: Flocas … [192].] Ordinarily the trust will attach to all of the property of the survivor upon the survivor’s death and not only the property passing to the survivor under the will of the first to die. Therefore, the obligation will attach to the property of the survivor acquired after the death of the first to die.
[56] Professor Sheridan referred to a case in which it was said that the surviving wife could make gifts provided that they were reasonable, absolute, bona fide, not testamentary in effect and not made for the purpose of defeating the contract or having that effect. He concluded that the United States courts will give whatever remedy is appropriate to enforce the mutual wills agreement or precent fraud. Further, while many details have not been considered in Commonwealth countries, there is no difficulty in policy or concept in construing and enforcing a trust which is to crystallise on death while allowing beneficial enjoyment with limited or unlimited powers of disposition by the legal owner during his lifetime. Professor Sheridan wrote:
All the terms of the trust, including its date of commencement, depend on the agreement between the parties and (assuming it is not express) the trust may be implied or constructive as appropriate. If, during the floating stage, the rights of disposal of the legal owner are not absolute, a breach of trust may occur not solely by reason of acts done but also by virtue of the motives with which they are done. There is no repugnancy between the legal owner having rights of enjoyment and disposition and his inability to affect the destine of the property by a subsequent will: conceptually, the owner can be a trustee for himself for life, have a special or general power of appointment inter vivos, and be a trustee for a remainderman of the property insofar as it is unaffected by a valid exercise of the power.
[57] The nature of the trust that binds the property subject to the agreement and the extent to which the survivor is free to deal with property during his or her lifetime depends ultimately on the terms of the agreement between the testators. In Walters v Olins Mummery J referred with approval, [Footnote 75: Walters v Olins [2009] CH 212 [38] …] to the analysis of Norris J at first instance in Olins v Walters. [Footnote 76: Olins v Walters [2007] EWHC 3060 (Ch) [9] …] Norris J said that if the facts establish that the testators made mutual wills pursuant to a contract not to revoke them:
… then upon the death of T1 equity will impose upon T2 a form of constructive trust (shaped by the exact terms of the contract that T1 and T2 have made). The constructive trust is imposed because T1 has made a disposition of property on the faith of T2’s promise to make a will in form Y, and with the object of preventing T1 from being defrauded. (emphasis in italics by Le Miere J).
[58] Mummery LJ also referred with approval to the following sentence in the 31st edition of Snell’s Principles of Equity:
Mutual wills provide an instance of a trust arising by operation of law to give effect to an express intention of the two testators.
In Flocas v Carlson, McMillan J appears to suggest that a person cannot make any disposition intended to defeat the agreement, whether testamentary or not:
Finally, there is to my mind an aspect of this doctrine that remains unsatisfactorily settled but need not be resolved for the purposes of this case. It concerns the ‘floating obligation’ suggested by Dixon J that is said to crystallise on the death of the survivor. It is plain that the property the subject of the promise is not held on trust during the survivor’s lifetime, and the survivor is entitled to retain the income and dispose of the capital if they so choose. The extent, and nature of an obligation not to dispose of the property inter vivos by a gift ‘calculated to defeat the intention of the compact’ seems to me to be difficult to articulate. Although it may be readily ascertainable in circumstances where the survivor deliberately disposes of the property in their lifetime in order to avoid the terms of the agreement, it may be more difficult where the disposition is outside the survivor’s control due to bankruptcy or mental incapacity. The only comment I would venture is that such an obligation is more readily accommodated if, as I consider, the mutual wills agreement is a contract, and the floating obligation is an obligation that must be determined by reference to the express and implied terms of that contract. A court can confidently apply established principles concerning the incorporation, implication and interpretation of contractual terms in deciding the extent of that floating obligation and whether it has been breached in the circumstances of the case. If, on the other hand, the mutual wills agreement is a unique equitable beast, the nature of Dixon J’s floating obligation will be far more difficult to discern. [Flocas [2015] VSC 221 [192]]
What may be a breach of a mutual wills agreement will be determined by the nature and extent of the promise. If the agreement provides no more than that the survivor’s estate shall pass in the agreed manner on his or her death, then the survivor will be free to dispose of his or her property during his lifetime in any way that is not testamentary in nature or directly contrary to the terms of the agreement. If the parties intend not only that the testator’s estate should pass to the intended beneficiary on his or her death, but that his power to use his or her property in any manner he or she thinks fit in his or her lifetime should be curtailed, an express promise to that effect is necessary.
Flocas v Carlson and others (as executors of the will and estate of Marjorie Lillian Swift) [2015] VSC 221
and
[179] … The doctrine of mutual wills overlaps the jurisdictions inherited from the common law, chancery and ecclesiastical courts: the common law of assumpsit, now the modern law of contract, governs the existence of an agreement; the probate law prevents the enforcement of the precise terms of that contract by admitting the last will to probate; and the remedies once provided by the Chancellor circumvent the probate law by imposing a constructive trust on the legal personal representative. The mere fact that equitable remedies such as a decree for specific performance or a declaration of constructive trust are the devices used to give effect to the agreement does not take the elements of the agreement that needs to be proved into an alternative equitable universe.
[180] The structure of the basic promise in a mutual wills agreement (from A to B for C) closely resembles an express trust, but there are a number of obstacles that stand in the way of the majority of such promises being enforced at trusts, primarily relating to when and whether the property said to be the subject of the trust can be ascertained.
[181] …[A]lthough I shall return to Dixon J’s “floating obligation”, where the survivor’s promise is to leave unascertained property, but has absolute ownership and rights of disposal inter vivos, it seems to me that only contract can provide a remedy, because it cannot be said that the promisor’s intention is for the property to be held on trust. The observations by Gleeson CJ in Barns v Barns that the deceased has beneficial ownership of the property at his death seem to support that observation.
[182] … There are perhaps complex questions of jurisprudential theory at play in this doctrine, concerning the relationship between express and constructive trusts; the extent to which a contractual agreement may also impose fiduciary obligations; and the circumstances in which a contractual promise may instead be held on trust. As Gummow and Hayne JJ observed in Barns v Barns, there is no dichotomy between the law of contract and the law of trusts, and the trust is, as Deane J said in Muschinski v Dodds, essentially remedial in its origins. None of those questions need to be considered for the resolution of this case, however. The plaintiff here has pleaded an agreement, not an express trust, and the cases I have referred to show that the standard of agreement necessary to be established is a contract.
[188] … That result is no reflection of the terms of the agreement but rather the dictates of the law of probate. The consequence of that result is that any contract, if unfulfilled, necessarily must be enforced by imposing some obligation on the deceased’s estate that is not apparent from the terms of their later inconsistent will, normally in the form of a constructive trust.
[190] … A more sophisticated explanation may be … as Dixon J postulated in Birmingham v Renfrew, to enforce the constructive trust arising as a remedial device …
Parties’ submissions on Flocas v Carlson
It is not correct [for Annabel] to say that equity is not engaged to prevent fraud in these circumstances. The respondent has refused to disclose her assets and liabilities which are the subject of the mutual will. If the court does not make the Orders sought by the applicant:
i The respondent may avoid her obligations under clause 3(b) of the mutual will agreement;
ii The applicant will be unaware of any breach of the respondent’s obligation under that clause until the respondent’s death, at which time the applicant may have no remedy.
Conclusion – Annabel does not hold the property the subject of the MWA on constructive trust for James during her lifetime
[1]Intending no disrespect, I have referred to the parties by their first names to avoid confusion.
[2]With James to pay the estate’s costs.
[3]In correspondence tendered before me.
[4]And his siblings and step-siblings.
[5]In the respondent’s written reply submissions, dated 9 February 2022.
[6]Or its shares, or any changes in her approach to its valuation over time.
[7]My references hereafter to “marriage” or “marriages” are to be taken as including other unions or relationships.
[8]My references here and hereafter to “spouse” or “spouses” are to be taken as including partners in other unions or relationships.
[9]These are examples only.
[10]In the example case in which only one spouse to a second marriage brings children to the marriage.
[11]Given in the context of another case, Lord Walpole v Lord Orford, which is discussed by me below.
[12]In his written submissions he said, “The applicant asserts that he is entitled to an accounting of the assets held on trust for his benefit during the respondent’s life so that the respondent’s dealings with the trust assets can be reviewed by the applicant and steps taken by the applicant should there be any breach by the respondent of her contractual obligations pursuant to the mutual will agreement”.
Similarly, in oral submissions, James’ counsel was clear that no breach was alleged. At 1-11, he referred to “successful cases being brought during a person’s lifetime where there’s an anticipatory breach” and added “… we’re not alleging that breach because we don’t have the information”. He submitted that it was “crucial” for his client “to obtain the information we seek, just to make sure that the terms of what’s being agreed are being adhered to, nothing more”. Because otherwise, our rights to relief might be too late …” He said that the purpose for which the orders were sought was “predominantly just – [to?] see that the respondent adheres to the mutual agreement of which she agreed, and so that my client in 20 years’ time is not left with a too late, too bad, all the assets have gone”. A little later, he said, “the concern for my client, given the refusal to give the information, obviously, is anticipation of assets (sic). That’s plain, such that he’s not in a position to seek any recourse later on. And that’s the sole utility in today’s application”.
[13]Putting to one side all of the complications raised by the respondent including the impossibility of identifying the property the subject of the trust, which I acknowledge the applicant did not grapple with.