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Forster v Forster QSC 30
SUPREME COURT OF QUEENSLAND
Forster v Forster  QSC 30
JAMES DERWENT CAMPBELL FORSTER
ANNABEL LISA FORSTER
BS No 12687 of 2021
Supreme Court at Brisbane
8 March 2022
7 December 2021; final written submissions received 9 February 2022
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 basis
Trusts Act 1973 (Qld), section 8
Barns v Barns and others (2003) 214 CLR 169
Bauer & Ors v Hussey & Anor  QSC 269
Birmingham & Others v Renfrew & Others (1937) 57 CLR 666
Dufour v Pereira (1769) 1 Dick 419; 21 ER 332
Flocas v Carlson and others  VSC 221
Gordon Archibald Bigg v Queensland Trustees Limited Unreported, N0 825 of 1989
Lord Walpole v. Lord Orford (1797) 3 Ves. 402
Palmer v Bank of New South Wales (1975) 133 CLR 150
Re Basham  1 WLR 1498
Re Cleaver, decd.  1 WLR 939
Re Dale (decd)  4 All ER 129
Re Goodchild (deceased); Goodchild and another v Goodchild  1 All ER 670
Re Hagger  2 Ch 190, cited in ‘Mutual Wills’ paper
Schaefer v Schuhmann and Others (1972) 46 ALJR 82 (Privy Council
I Klevansky for the applicant
C A Brewer for the respondent
The Estate Lawyers for the applicant
Holding Redlich for the respondent
- This application arose out of a dispute over the estate of Timothy Forster (the deceased). The applicant is the deceased’s son, James. The respondent is the deceased’s widow, and James’ stepmother, Annabel. Annabel was the deceased’s second wife. They had each been married once before. The deceased had three children (including James) from his first marriage. Annabel has two.
- In broad terms, by his will, the deceased left his estate to Annabel absolutely, having agreed with her in a “mutual wills agreement” (MWA) that, upon her death, it would be shared equally among their five children and step-children.
- After the deceased’s death, Annabel inherited his estate in accordance with his will, which also provided smaller gifts to his own children. In 2020, James and his siblings applied for further provision from their father’s estate, but ultimately withdrew their application.
- James and Annabel do not have a good relationship. After his father’s death, and the administration of his estate, James, through his lawyers, has repeatedly asked Annabel to make disclosure to him of her financial position. Annabel, through her lawyers, has repeatedly stated that: (a) she will not disclose her financial position to James; (b) she is not in breach of the MWA; and (c) she will comply with her obligations under the MWA.
- Notwithstanding Annabel’s statements in  (b) and (c), James does not trust her and suspects that she has, or will, breach the MWA. I hasten to add that there was no evidence before me to support such a suspicion. Indeed, James’ lawyers confirmed that they have no evidence that Annabel had, or would, breach the MWA.
- In the face of Annabel’s refusal to provide her financial information to him, James applied for court orders requiring her to disclose her financial position to him yearly, from now until her death, relying upon the doctrine of mutual wills, and section 8 of the Trusts Act 1973 (Qld).
- For James to succeed in his application, he needed to persuade me of three things, namely –
- (a)that Annabel held the property the subject of the MWA (that is, the property she inherited from the deceased and her own property) on constructive trust for James during her lifetime,
and, if so,
- (b)that the pre-conditions for an order under section 8 of the Trusts Act had been met including that Annabel had done an act or made an omission or decision as trustee which aggrieved James, or that there were reasonable grounds for apprehending that Annabel might do such an act or make such an omission or decision,
and, if so,
- (c)that it was appropriate for me to order Annabel to account to James for the property during her lifetime.
- As to (a), in my view, properly understood, the authorities and the paper upon which James relied in this application do not support his assertion that Annabel is a constructive trustee of the property the subject of the MWA.
- Indeed, the paper upon which James relied included a quote from the judgment of McMillan J in Flocas v Carlson  VSC 221 in which her Honour said (in obiter) that it was plain that property the subject of an MWA was not held on trust during the lifetime of the surviving party to an MWA. Having made that observation, I wish to stress that I am not suggesting that I considered her Honour’s view determinative of (a). As my reasons demonstrate, I studied the authorities and the paper upon which James relied in great detail and reached the conclusion that, in the absence of fraud, Annabel does not hold the property the subject of the MWA in trust for James during her lifetime.
- As to (b), even if I am wrong about (a) and Annabel is a constructive trustee of the property the subject of the MWA, James relied only on suspicion and mistrust and fell well short of establishing reasonable grounds for apprehending that Annabel might do an “aggrieving” act or make an “aggrieving” omission or decision.
- As to (c), even if I am wrong about (a) and Annabel is a constructive trustee of the property the subject of the MWA, the nature and scope of the trust are defined by the MWA and the wills made in pursuance of it. In my view, Annabel’s entitlement under the MWA and the deceased’s will to absolute ownership of the property the subject of the MWA, albeit subject to certain limits set out in the MWA, is inconsistent with a requirement that she account to James for that property during her lifetime.
- James made a late attempt to suggest that “equity” was “engaged” and would require Annabel to account to him even if she were not a trustee because she had refused to disclose her assets and liabilities to him. Apart from the fact that the application was not brought on that basis, and the respondent had no opportunity to reply to it, that suggestion is wholly unsupported in law (indeed, James made it without reference to authority or principle) and reflected a misunderstanding of equitable remedies.
- James’ application is refused.
- My reasons, in more detail, follow.
- The deceased and Annabel were married for 24 years. It was a second marriage for each of them. Annabel has two children from her first marriage. The deceased had three children (including James) from his first marriage. There are no children of the marriage of the deceased and Annabel.
- The deceased and Annabel entered into a mutual wills agreement (MWA) on 20 August 2015, intending to achieve, after their deaths, the equal distribution of their combined estate among their five children and step-children. Paragraph C of the MWA’s recitals stated their intention –
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.
- Essentially, under the MWA, the survivor of the deceased and Annabel was permitted to use the estate to maintain their (I infer, high) standard of living and to pay for their necessary health and aged care; but was not permitted to intentionally “substantially diminish” it, including by making gifts to their own children. These obligations are expressed at clause 3 of the MWA as follows –
Each of the parties agrees that upon the death of the other and having inherited the Estate of the other:
- (a)he or she will ensure that any Will made subsequently is generally in accord with the provisions of the Will annexed hereto in the sense that it generally provides equally for all of the children of both parties subject as in herein provided;
- (b)he or she will not thereafter take any action which is intended to substantially diminish the assets which would otherwise comprise his or her Estate and would be the subject of his or her will (for example by a substantial gift or gifts to his or her own son or daughter) other than what is reasonably consistent with the maintenance of a reasonable standard of living to which the parties have been accustomed and for necessary health and aged care; and will take all reasonable precautions for the preservation of the Estate.
- The limits to which I referred in  above are those set out in clause 3(b).
- There was no will annexed to the MWA – or at least not in the copy of it relied upon by the applicant.
The deceased’s will
- The deceased executed his will on the same day as the MWA was made.
- By clause 2, the deceased appointed Annabel to be his executor and trustee.
- By clause 3, he left certain shares to his own three children.
- By clause 4, which concerned the proceeds of his life insurance policy, he gave $125,000 to one of his own daughters (explaining that he had already given $100,000 to his two other children during his lifetime); and the balance to the trustee of a trust called “The JSLF Trust” – “J” “S” and “L” being the first initials of the names of the deceased’s own children.
- By clause 5 of his will, he gave to Annabel –
- his household contents;
- his shares in certain trustee companies (other than the trustee company for The JSLF Trust); and
- “the rest of his estate … absolutely”.
- He also appointed Annabel and his lawyer as joint “Guardians, Appointors or Principals” of any discretionary trust of which he was guardian, appointor, or principal at the time of his death.
- Clause 6 set out what was to happen if Annabel pre-deceased the deceased. Consistently with the MWA, the clause broadly distributed the estate equally between the deceased’s three children and Annabel’s two children, including through certain trust arrangements.
- Clause 9 contained the following declaration –
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.
- The deceased died on 28 September 2018. In accordance with his will, Annabel inherited most of his estate. Also, as the surviving joint tenant of their $3 million matrimonial home, she assumed ownership of it.
Lead up to the present application
- There is hostility between James and Annabel.
- Although James has not expressly asserted that Annabel has or will substantially diminish her estate during her lifetime (including to advantage her own children over her stepchildren), this application is premised on the basis that she might – although, I emphasise, the evidence presented to me does not support such a premise.
- James, through his lawyers, asked Annabel to disclose “her personal assets and liabilities which are the subject of the mutual will agreement”. She, through her lawyers, declined to do so, although she promised to abide by the terms of the MWA.
- Against that background, James applied to the Court for orders that: (a) Annabel disclose to him her current assets and liabilities, within 14 days of the order, and on or before 30 June of each year thereafter; and (b) she provide James with 14 days’ notice of her transfer of any property worth more than $50,000.
- James asserted that, in accordance with the doctrine of mutual wills, upon the death of his father, a constructive trust was imposed upon the property the subject of the MWA, and Annabel therefore held it as trustee for him (and, I assume, his siblings and stepsiblings), relying on certain cases and a paper by Justice Rene Le Miere of the Supreme Court of Western Australia, all of which are discussed below.
- James then relied upon section 8 of the Trusts Act 1973 (Qld) as the source of the Court’s power to make the orders sought, asserting that he was a person with a contingent interest in trust property, which Annabel held as a constructive trustee.
- Section 8 provides –
8 Application to court to review acts and decisions
- (1)Any person who has, directly or indirectly, an interest, whether vested or contingent, in any trust property or who has a right of due administration in respect of any trust, and who is aggrieved by any act, omission or decision of a trustee or other person in the exercise of any power conferred by this Act or by law or by the instrument (if any) creating the trust, or who has reasonable grounds to apprehend any such act, omission or decision by which the person will be aggrieved, may apply to the court to review the act, omission or decision, or to give directions in respect of the apprehended act, omission or decision; and the court may require the trustee or other person to appear before it and to substantiate and uphold the grounds of the act, omission or decision which is being reviewed and may make such order in the premises (including such order as to costs) as the circumstances require.
- (2)An order of the court under subsection (1) shall not—
- (a)disturb any distribution of the trust property, made without breach of trust, before the trustee became aware of the making of the application to the court; or
- (b)affect any right acquired by any person in good faith and for valuable consideration.
- (3)Where any application is made under this section, the court may—
- (a)if any question of fact is involved—determine that question or give directions as to the manner in which that question shall be determined; and
- (b)if the court is being asked to make an order which may adversely affect the rights of any person who is not a party to the proceedings—direct that that person shall be made a party to the proceedings.
- Section 5 of the Act defines “trust” as follows –
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.
- Section 5 of the Act defines “trust property” as including “property settled on any trust, whether express, implied, resulting, bare, or constructive”.
- The parties proceeded on the basis that the success of James’ application depended primarily on my finding that Annabel is the constructive trustee of a trust of which James is a beneficiary, thereby rendering section 8 applicable. That was an oversimplification of things. Even if I were to find that Annabel is a constructive trustee of the property the subject of the MWA, it does not automatically follow that it would be appropriate to require her to account to James in the way he desired.
- Nor did James’ submissions address in any meaningful way the pre-requisites to an order under section 8. He did not clearly identify the “act omission or decision” or the apprehended “act, omission or decision” upon which his application was based. I did not know whether he was relying upon Annabel’s “decision” not to provide her financial information to him; or (more likely) whether he was suggesting that he apprehended that she would somehow breach her obligations under the MWA.
- If he intended to rely upon the latter apprehension, then he did not expressly address me on the reasonable grounds upon which it was said to be based. He complained about Annabel’s refusal to disclose her financial position to him; and he asserted that she had not accurately valued the deceased’s estate. But it did not logically follow from either Annabel’s declining to provide James with details of her financial position; or the way in which she valued the deceased’s estate, that she was intending to deal with her property contrary to the MWA. Nor did James’ counsel assist me to understand how it might be said that either of those matters amounted to reasonable grounds.
- Annabel submitted that James’ application was entirely misconceived and based on a misapprehension of the law of mutual wills and constructive trusts. She submitted that, although the MWA imposed obligations upon Annabel and the deceased, it did not “create” a trust (either at the time of the execution of the MWA or upon the death of the deceased). Annabel submitted that a constructive trust is a remedy, imposed by the Courts of Equity, to prevent fraud. That would include the fraud involved in a breach of the obligations created by the MWA; but in the absence of such a fraud, no trust existed.
- The evidence before me revealed that James’ lawyers told Annabel that they were “determined to force [her] to make full and complete disclosure as well as an ongoing disclosure” to ensure that the rights of James and his two siblings were protected. Obviously, it is by this application that James and his siblings hope to force Annabel to make the disclosure they seek. James submitted that, unless I granted the relief sought, if Annabel were to avoid her obligations under the MWA , he may not become aware of it in time to take any meaningful action in response.
- Spouses in second (or subsequent) marriages may wish to ensure that, upon their death, at least some of the property they brought into the marriage is preserved for their own children. In that context, spouses may enter into a contractual “mutual wills agreement” to ensure that their children are “looked after” in terms of their inheritance.
- To take as an example the case where only one spouse to a second marriage brings children to the marriage, and where that spouse has brought substantial property into the marriage, the spouses may agree, in an MWA, to execute, and not revoke, mutual wills which have the effect of –
- (a)allowing the surviving spouse (that is, the second spouse to die, whoever that may be) full enjoyment of the property of the first spouse to die during their lifetime, with that property, or what remains of it at the death of the surviving spouse, to be distributed, by the survivor’s will, to the children brought into the marriage; or
- (b)providing the surviving spouse with a life interest in the property of the first spouse to die, with that property to pass, upon the survivor’s death, by the survivor’s will, to the children brought into the marriage.
- However, notwithstanding an MWA and the contractual promises made by each spouse to the other under it, a will is a revocable instrument. The law cannot prevent the surviving spouse from revoking their mutual will and making a new one which excludes the children of the first to die. The law of probate can do nothing about fraud of this kind, committed by one party to the MWA upon the other. In the probate sense, the fraudulent spouse’s later will is effective as their operative will.
- However, if the doctrine of mutual wills applies – that is, if the MWA is contractual – equity will intervene. Equity will not permit the surviving party to an MWA to deal with the property the subject of the MWA in a way that is contrary to the MWA by revoking their mutual will and executing another. Notwithstanding the later will, equity will specifically enforce the MWA, including by way of imposing a constructive trust upon the property the subject of the MWA for the benefit of those to whom the property was ultimately promised.
- Even without revoking their mutual will, a surviving spouse may act apparently inconsistently with the MWA during their lifetime, by disposing of, or otherwise consuming, the inherited property, leaving nothing to pass to their step-children. Whether this entails a breach of the MWA or not is usually resolved by the terms of the MWA, although there is case law dealing with the situation where the MWA is silent about the extent to which the survivor must preserve the inherited property. If there has been a breach of the MWA by such failing to preserve, then that is another situation to which the doctrine of mutual wills may apply and equity may intervene.
Issues raised in this application and James’ authorities - overview
- The primary questions raised by this application are (a) whether a constructive trust arose upon the death of the deceased, casting Annabel as a constructive trustee of the property the subject of the MWA in the absence of fraud and, if so, (b) whether Annabel, as constructive trustee, ought to be required to account to James for her property during her lifetime. A careful analysis of the cases upon which James relied revealed that those issues were not directly addressed therein.
- As to (a), the cases upon which James relied, which directly invoked “the doctrine of mutual wills”, concerned a court being called upon to intervene to address a fraud – but there is no fraud alleged here.
- Also, as to (b), as mentioned, it was simplistic to assume that the success of the application hinged on Annabel’s characterisation as a constructive trustee. The suggestion that Annabel held the property, the subject of the MWA, as a constructive trustee in the absence of fraud raised obvious questions about the nature of Annabel’s alleged trusteeship which were not addressed by the applicant including: How could Annabel’s status as constructive trustee during her lifetime be consistent with her absolute ownership of the property? Given that she held the property absolutely, to what extent was she obliged to put the interests of the beneficiaries ahead of her own interests during her lifetime? What were her duties of management, or other obligations as trustee? And, critically, how was imposing upon Annabel an obligation to account to James for the property consistent with her right to beneficial enjoyment of it, albeit subject to the MWA? None of the cases upon which James relied dealt with the duties owed by a constructive trustee under the doctrine of mutual wills beyond the “duty” to convey the property in accordance with the terms of the mutual will, which “duty” was itself enforced by court order.
Analysis of the authorities upon which James relied
Dufour v Pereira (1769) 1 Dick 419; 21 ER 332
- This decision by Lord Camden is the foundational case on the doctrine of mutual wills. There are two reports of it. The first is in Juridical Arguments, published by Francis Hargrave, a barrister, in 1799. Hargrave’s report sets out the handwritten notes upon which Lord Camden based his judgment. The other later report, published in Dickens in 1803, is briefer.
- The facts of this case were as follows. Rene and Camilla Ranc were husband and wife. They executed a joint will (in 1745) which left the property of the first of them to die to their survivor for life; and the property of the survivor to their children and grandchildren upon the survivor’s death. Rene was the first to die. Camilla took under his will. Then she revoked the joint will and executed a new one, leaving her property to one daughter only. The question for Lord Camden was whether Camilla could validly revoke the joint will.
- Rene and Camilla executed their joint will in Europe but moved to England before Rene died. Such a will was not then known to the law of England, but Lord Camden determined that its operation fell to be decided by English law.
- I gratefully adopt McMillan J’s discussion of this case in Flocas v Carlson, as follows (my emphasis) –
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 brief Dickens report concluded as follows –
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.
- In my view, this case does not support James’ argument that Annabel is a constructive trustee during her lifetime in the absence of her breach or threatened breach of the MWA, requiring her to account to him for the property. Rather, this case suggests that, by virtue of the principles of equity, a survivor will be converted into a trustee if he or she commits a fraud by refusing to carry out his or her part of the MWA (cf “if the other then refuses, he is guilty of a fraud, can never unbind himself and becomes a trustee of course” and “there is not an instance to be found since this jurisdiction was established, where one man has ever been released from his engagement, after the other has performed his part”).
Birmingham & Others v Renfrew & Others (1937) 57 CLR 666
- This case is considered the “landmark” Australian case on mutual wills.
- Grace and Joseph Russell were married. Grace was the beneficiary of a large inheritance. Joseph had no property. Grace and Joseph agreed that – instead of her making a will leaving him her property for life; and then to certain relatives – she would (after certain legacies) leave the residue to him, upon his promise that he would leave the property which he inherited from her to her relatives.
- In accordance with their agreement, on 31 March 1932, Joseph made a will in which, after the payment of certain debts and expenses, he left the balance of his estate to Grace and, in the event of her not surviving him, to four of her relatives. He agreed with Grace not to alter his will. Also, in accordance with their agreement, on 1 April 1932, Grace made a will in which, after providing for certain legacies, she left the residue to Joseph; and in the event of his not surviving her, to the same four of her relatives (“Grace’s Relatives”).
- On 26 July 1932, Grace died. Joseph took an annuity under her will, and the residue. Thereafter, he changed his will several times. His final will was to the benefit of his own relatives at the expense of Grace’s Relatives.
- Grace’s Relatives alleged that Joseph’s will of 31 March 1932 was made in pursuance of a binding agreement with Grace as to how he would dispose of her property, in consideration of which she made her will which left him the benefits which he had accepted. Grace’s Relatives sought (amongst other relief) enforcement of the agreement, or a declaration that Joseph’s executors held his estate on trust for them.
- Joseph’s relatives, who benefitted under his final will, denied that a binding agreement existed between Grace and Joseph.
- The primary judge held that the agreement was enforceable: it was for the benefit of Grace’s Relatives, who were entitled to enforce their rights. However, the primary judge did not explain the basis of their rights.
- Joseph’s relatives appealed to the High Court. They argued that there was no such thing as specific performance of an agreement to make a will; and that a third party could not enforce an agreement to which they were not a party. They argued that a promise not to revoke a mutual will was not enough to create equitable interests; and that the freedom to deal with property during the life of the survivor, as per the will, was inconsistent with the creation of an equitable interest.
- Grace’s Relatives submitted inter alia that in the case of mutual wills, equity will restrain the parties from doing anything in fraud of the agreement.
- The High Court found that Grace and Joseph had entered into a mutual wills agreement, and imposed a constructive trust upon Joseph’s executor to perform the agreement.
- Latham CJ found that the case fell within the principles enunciated by Lord Camden in Dufour v Pereira. As Grace’s Relatives conceded, the agreement between Grace and Joseph did not have the effect of preventing Joseph from dealing with the property he received from Grace during his lifetime. This meant that any trust could only be a kind of floating trust which finally attached to the property he left upon his death.
- His Honour continued at 676 (footnotes and citations omitted, my emphasis) –
… 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.
- James relied particularly upon the judgment of Dixon J at 687 – 690. Annabel urged me to consider Dixon J’s comments in context, in which case I would appreciate, she submitted, that any trust was one imposed by equity to prevent a fraud only.
- At 683, his Honour said
… 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 …
- His Honour then spent some time explaining the way in which obligations attached to each party to an MWA, quoting from an opinion by Hargrave contained in Juridical Arguments in which, his Honour said (at page 684) the author gave “in a sentence” the principle upon which MWAs are enforced in favour of the beneficiaries, as follows (my emphasis) –
“ … 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.”
- In another quote from the opinion set out in Dixon J’s judgment at 685, there is a reference to equitable relief by way of a decree of specific performance in the face of breach; and, for that purpose, the conversion, into trustees, of the promising party and the volunteers deriving under him (my emphasis) –
“… [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” …
- At 686, Dixon J observed that the principles upon which Hargrave based his arguments had passed into the modern law. His Honour continued, emphasising equity’s intervention to provide relief (my emphasis, citations and footnotes omitted) –
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.
- His Honour then discussed authorities which were to the effect that, if a person agreed for valuable consideration to settle a specific estate, the person became a trustee of it for its intended objects, and all the consequences of a trust followed. This principle, his Honour explained, was “but the logical consequence of the power of a court of equity to grant, and its practice in granting, specific performance of a contract to convey or settle real estate”. His Honour stated that the point to take from the principle was that “the equitable obligation to fulfil the contract attaches to the property the subject of the contract and converts the party into a trustee for the objects to be benefitted. His Honour continued, at 688, emphasising the remedial nature of the imposition of a trust in this context (my emphasis, citations and footnotes omitted) –
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”.
- His Honour then came to the “third element”, explaining that the obligation, created by the MWA, is suspended during the survivor’s lifetime, and then “crystallises” into a trust upon the death of the survivor. Also of significance for my purposes is his Honour’s description of the object of the transaction, which includes allowing the survivor to enjoy for their benefit the full ownership of the property, and permitting them to deal with it as absolute owner during their lifetime, albeit not in a way intended to defeat the terms of an MWA (my emphasis) –
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.
- At 690, after discussing cases which recognised the Dufour v Pereira principle as “undeniably sound”, and one in which a court declared a trust on the basis of a mutual will, his Honour continued in a manner which, in my view, reinforced the point that a trust was imposed to secure performance of the MWA – that is, in his Honour’s reference to the intervention of equity and the enforcement of the trust (my emphasis, footnotes omitted) –
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.
- Evatt J agreed with the Chief Justice and Dixon J that a court of equity would specifically enforce a MWA, even though the plaintiffs were not parties to it.
- In my respectful view, Dixon J’s description of the obligation which falls upon the survivor is the most apt description of the position Annabel is in in this case. That is, she is, during her lifetime, as absolute owner of the deceased’s property and (of course) her own property, subject to a floating obligation to deal with it only in accordance with the MWA (which may see her use some of it up); which obligation crystallises upon her death into a trust over the property which remains, to ensure its distribution as per the terms of the MWA.
- Although it does not arise as an issue in this matter, I note also that there has been discussion in the authorities about the scope of the “gifts and settlements inter vivos” which, according to Dixon J, cannot be made. For example, in Palmer v Bank of New South Wales (1975) 133 CLR 150, Barwick CJ said at 162 that Dixon J had in mind “gifts and settlements which were either testamentary in nature or which were in contravention of the terms of the particular contract”. Nourse J in Re Cleaver (see below) said that Dixon J was clearly referring to gifts intended to defeat the intention of the MWA and that there could be no objection to “ordinary gifts of small value”.
Schaefer v Schuhmann and Others (1972) 46 ALJR 82 (Privy Council)
- This case concerned the “competition” between an agreement to leave property by will to A, and a valid claim, by B, for adequate provision from an estate. By majority, the Privy Council held the court could not interfere in an agreement to leave property by will by imposing on the property a charge for additional provision. It is important to note that this decision was not followed by the High Court of Australia (see Barns v Barns below). Nor did it directly involve the doctrine of mutual wills. Nevertheless, it was one of the authorities to which James referred – albeit in the context of a submission or observation that an injunction is available to restrain a testator from disposing of property in breach of a contract to devise or bequeath it to a certain person.
- In Schaefer v Schuhmann and Others, the testator agreed to leave his house to his housekeeper on the condition that she was still working for him at his death. He kept to the agreement and, upon his death, she inherited the house; he gave each of his four daughters legacies of $2000; and left the residue of his estate to his three sons.
- The testator’s daughters applied for proper maintenance from their father’s estate. At first instance, the court imposed a charge on the house in favour of three of the four daughters. The housekeeper appealed to the Privy Council. She acknowledged that three of the daughters were entitled to additional provision but submitted that it ought to come out of the residuary estate.
- The questions for the Privy Council were: (a) whether there was an enforceable agreement between the testator and the housekeeper and (b), if there was such an agreement, whether the court had jurisdiction to interfere with the benefit conferred by the testator upon the housekeeper.
- As to (a), the Privy Council found that there was an enforceable agreement. As to (b), the majority held that the court had no jurisdiction to interfere with a benefit provided under a will in accordance with an agreement for valuable consideration to confer the benefit. In other words, the additional provision for three of the four daughters was to come out of residue.
- In dissent, at 91, Lord Simon of Glaisdale referred to the trust arising in circumstances of fraud (my emphasis) –
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.
- In his Lordship’s view, the deceased’s obligation to B was not “more potent or overriding” than the deceased’s obligation to provide for his dependents. The obligations were concurrent, and, in a family provision application, a court was to consider the promisee’s contractual or equitable rights along with the dependant’s statutory rights to adequate provision. His Lordship considered the primary judge’s decision to have been “entirely just”.
- This decision did not assist me in deciding whether a constructive trust arose in the present case in the absence of fraud during the lifetime of the survivor.
Gordon Archibald Bigg v Queensland Trustees Limited Unreported, No 825 of 1989
- In this matter, McPherson J (as his Honour then was) declared that the executor of the estate of Karleen Juanita Bigg held her estate on trust for the plaintiff in circumstances in which the deceased was in breach of an MWA.
- Queensland Trustees Limited was the executor of the estate of Karleen Bigg, the plaintiff’s late wife. It was a second marriage for both. Each had two children from their first marriages.
- Within a week of their marriage, they executed “dual” wills. By each will, the plaintiff and his wife appointed the other their executor and trustee and gave the whole of their estate to the other “for [his or her] own use”; with the proviso that, if one did not survive the other by 30 days, then it went to their four children equally.
- The plaintiff’s wife was the first to die. Upon her death, it was discovered that she had revoked her dual will. Her final will, admitted to probate, did not appoint the plaintiff her executor and trustee but instead left him with a life estate in a certain property and the rest to her two children.
- The plaintiff sought a declaration that Queensland Trustees Limited held all of the property of Mrs Bigg’s estate on trust for him, or alternatively, damages for breach of contract.
- In deciding to make the declaration, McPherson J made statements to the following effect –
- By statute, a will is made revocable, and the parties cannot by agreement displace that characteristic of a testamentary instrument;
- A later will that revokes an earlier will made in pursuance of an MWA remains the testator’s last will and testament – despite the testator’s breach of the MWA;
- The aggrieved party must seek their remedy for breach of the MWA not in a court of probate, but in a court of law or equity;
- It is the contract to make the will, and not the will itself, which is enforceable;
- A person who makes a binding promise to dispose of property by will in a certain manner is at law liable for damages for failing to keep that promise;
- An action may be brought during the lifetime of the person if the person disposes of his or her property contrary to the agreement;
- The measure of damages is the value of the interest lost to the plaintiff;
- In equity, relief may go further. Equity would decree specific performance of the promise, so converting the party promising and all volunteers deriving under him or her into mere trustees of the property in questions – because of the equitable fraud practiced on the person to whom the promise was made, upon the faith of which the person made, or forborne to be made, a will or a settlement.
- McPherson J was in no doubt that an MWA had been made which included a promise not to revoke the wills made in pursuance of it. After referring to relevant authority to the effect that a mutual will cannot be secretly revoked, his Honour said, in effect, that a trust was imposed upon breach of the agreement (at 7) –
[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 was argued that, because the plaintiff discovered that there had been a breach of the MWA during his lifetime, he was not prejudiced because he could change his will and that that there was no need for equitable intervention. At 10, his Honour said –
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 …
- His Honour observed that there may well be cases in which the survivor has suffered prejudice by reason of his not having been given notice of revocation before the death of the other party – in which case, equity would intervene.
- At 10 and 11, his Honour referred to the decision of in Re Basham  1 WLR 1498, in which the principle of equitable estoppel was applied to a case in which the plaintiff continued to provide benefits to the deceased in the belief, encouraged by the deceased, that property would be left to her by the deceased on that person’s death.
- In deciding whether the plaintiff fell within that principle, his Honour discussed the evidence and found that the plaintiff had suffered prejudice. He’d made investments in his wife’s name during her lifetime on the assumption that she had not revoked her mutual will. At 12, his Honour said that, in permitting the plaintiff to act to his prejudice, on the assumption that the agreement subsisted, the deceased had acted in a way which equity would not permit. His Honour continued (my emphasis) –
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 …
- There has been criticism of this decision in academic articles however, for present purposes, the relevant points are that:
- (a)the trust was imposed upon the executor of the first of the parties to the MWA to die, upon discovery of their breach of the MWA; and
- (b)that the declaration that the property was held on trust was made to ensure that those who benefitted from the deceased’s estate were held to the agreement she made.
Re Goodchild (deceased); Goodchild and another v Goodchild  1 All ER 670
- The testator and his first wife, Joan, executed wills: each leaving their estate first to the other, and then to their only child, their son, Gary. Joan died and the testator inherited her estate under her will. He later remarried Enid and made a new will, leaving everything to Enid.
- After the testator’s death, Gary brought proceedings against Enid, seeking a declaration that, after Jane’s death, the testator held her estate on trust for the plaintiff; and that after his death, Enid held it similarly. He also applied for additional provision out of the testator’s estate. The actions were consolidated.
- A significant evidential issue was whether the testator and his first wife had actually entered into a legally binding mutual wills agreement.
- Enid argued that even if Gary acquired rights under the doctrine of mutual wills, they were extinguished by the testator’s second marriage.
- Carnwath J held (at 678) that, if a clear MWA could be found, then the law would give effect to its purpose by way of a “floating trust” which became irrevocable after the death of the first testator and which crystallised upon the death of the second. The floating trust was not destroyed by the second testator’s remarriage.
- Having said that, his Honour found that the evidence fell short of establishing that the testator and his first wife entered into a legally binding mutual wills agreement. However, it was appropriate to order that some provision be made out of the testator’s estate for Gary; and the parties were directed to arrive at a “sensible financial arrangement”.
- James relied upon this decision for his Honour’s statements about the law giving effect to the purpose of an MWA by way of a “floating trust”.
- In reaching the position expressed at 678, his Honour reviewed relevant authorities including Re Dale (decd)  4 All ER 129 (Morrittt J); Re Cleaver, decd.  1 WLR 939 (Nourse J); and the decision of the High Court in Birmingham v Renfrew.
- His Honour’s judgment included the following quotes from Re Dale and Re Cleaver, decd, both of which concerned the imposition of a trust in circumstances in which a party to an MWA had reneged upon the agreement –
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 issue in Re Dale was whether it was necessary, for the doctrine of mutual wills to apply, for the second testator to die to have obtained a personal financial benefit under the will of the first to die.
- A husband and wife executed identical wills, leaving their respective estate to their son and daughter in equal shares. The husband died, without revoking his will. After his death, his wife revoked her will and made a new will, leaving a small amount of money to her daughter and the balance of her estate to her son.
- After their mother’s death, the plaintiff (the daughter) brought a claim against her brother (who was also the executor of their mother’s estate) arguing that the agreement made between their father and mother was intended to be binding and irrevocable. She argued that, upon her father’s death, or upon the grant of probate of his will, her mother became bound in equity to give effect to the agreement she made with him. Because she breached the agreement, her son held her estate as trustee for himself and his sister in equal shares. The son argued that the doctrine of mutual wills did not apply because neither parent benefitted under the other’s will.
- Morritt J stated the doctrine of mutual wills and observed that it was not in dispute: the question for his Honour was as to the circumstances in which it applied. Morritt J concluded that the doctrine of mutual wills did not only apply where testators conferred mutual benefits on each other.
- Morritt J’s statement of the doctrine of mutual wills was quoted in Goodchild as above. Before making that statement in Re Dale, Morritt J noted that the origin of the doctrine of mutual wills was the judgment of Lord Camden LC in Dufour v Pereira. Relevantly for my purposes, Morritt J elaborated on Lord Camden’s judgment, emphasising that the conversion to trusteeship followed fraud. Morritt J said at 42 –
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.”
- Re Cleaver, decd concerned an MWA between a husband and wife in pursuance of which each executed wills, in 1974, leaving their property to the other if they were survived by the other; but if they were not, then to named beneficiaries. The husband died first and the wife inherited his property in accordance with his will. After his death, his wife made several wills – the last of which was inconsistent with the MWA including because it excluded some of the beneficiaries completely. After the wife’s death, the excluded beneficiaries sought a declaration that the wife’s executors held her estate on trust to give effect to the 1974 will, in accordance with the doctrine of mutual wills; and an order that they administer and distribute the estate accordingly. One issue was whether there was sufficient evidence of an MWA. Another was whether the operation of the doctrine required the parties to agree not to revoke their wills. Those issues do not arise here and I will say nothing more about them.
- At 945, Nourse J referred to the judgment of Dixon J in Birmingham v Renfrew, which stated, in Nourse J’s view, “with all the clarity and learning for which the judgments of that most eminent judge are renowned … a correct analysis of the principles on which a case of enforceable mutual wills depends” (my emphasis). His Honour then went on to emphasise the remedial nature of a constructive trust in this context. At 947, his Honour said (my emphasis, citations omitted) –
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.
- Nourse J found that an MWA existed; a constructive trust was created; and the wife’s executors were required to administer and distribute her estate in accordance with her “mutual” will – not her last will.
- I found no support in Re Goodchild, nor in the cases to which it referred, for James’ argument which was, in essence, that a trust arose in the absence of a breach of the MWA. Without question, equity will intervene to prevent a fraud. But if the survivor adheres to the MWA, there is no need for equitable intervention to ensure its performance (including by way of declaration of trust) because the terms of the contract will have been fulfilled.
Barns v Barns and others (2003) 214 CLR 169
- The issue in this case was whether the deceased’s promise to make a certain testamentary disposition (in accordance with an MWA made by way of a deed) was subject to the potential operation of section 7 of the Inheritance (Family Provision) Act 1972 (SA), which empowered the Supreme Court of South Australia to order appropriate provision out of the estate of a deceased for the maintenance, education or advancement of any person entitled to claim such a benefit.
- In holding (by majority): (a) that the deceased’s promise to make a particular testamentary disposition was subject to the potential operation of the family provision legislation; and (b) that the deceased’s assets at the time of his death formed his estate for the purposes of section 7, the High Court declined to follow Schaefer v Schuhmann.
- As Gummow and Hayne JJ observed at 199, the authorities on mutual wills did not directly bear upon the issue for the High Court. Nevertheless the judgment contains observations about them. For my purposes, it is the statements to the effect that trust obligations under an MWA only arise if the survivor acts unconscionably that are particularly significant.
- The facts of Barns v Barns and others were as follows. A husband and wife had two children: a son and an adopted daughter. The husband and wife agreed, by deed with their son, to make identical wills which they would not revoke that: (a) appointed their son as executor and trustee; and (b) devised and bequeathed the whole of their estate to him, on trust for the surviving spouse, or to the son, if there was no surviving spouse (the MWA). The husband died without revoking his will. His wife survived him. Their daughter applied for provision out of her father’s estate.
- Anticipating that the deceased’s wife and son would rely upon the MWA to defeat her claim for provision, the daughter applied to a Master of the Supreme Court for a declaration that the MWA was void as being contrary to public policy. She was successful. The Master found that the objective purpose of the deed was to preclude an application for maintenance under the relevant legislation and thereby exclude the jurisdiction of the court under the Act.
- The son and his mother successfully appealed to the Supreme Court, only on the question whether the MWA was void because its effect was to preclude the daughter seeking and obtaining provision under the Act. It was held that, whilst the MWA had that effect, it was not contrary to public policy. It was a legal consequence of the scheme of the Act (which could be dealt with by legislation). The MWA was declared valid and the daughter’s claim for provision was dismissed. She then successfully appealed to the High Court.
- The question for the High Court was stated by Gleeson CJ as follows (at ):
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?
- The short answer of the majority to that question was “yes”. Obviously, the same question does not arise here. But the court’s discussion of mutual wills is relevant for my purposes.
- At , Gummow and Hayne JJ considered an argument that “the obligations” into which Mr Barns [the deceased], Mrs Barns and Mr Malcolm Barns [their son] entered on 2 May 1996 (the date of the Deed and the wills) “gave rise to a trust” in favour of Mrs Barns and Mr Malcolm Barns and that, as a consequence, there was no property in the estate of Mr Barns which might be the subject of an order under the Inheritance Act.
- That argument was rejected. Their Honours reasons for rejecting the argument emphasised the remedial nature of a constructive trust and equity’s concern to enlighten and control the common law. At , their Honours made the point that, in the case before them, there was no unconscientious conduct which might enliven equitable intervention. Their Honours said (footnotes omitted, my emphasis) –
 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”.
 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.
 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.”
 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.”
 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.
- At , their Honours observed that if Mrs Barns “having taken the benefit of her interest in the unadministered estate of Mr Barns, [were] thereafter to depart from her obligations owed to Mr Malcolm Barns in accordance with the Deed not to revoke her will without his written consent, such unconscientious conduct would attract equitable intervention” (my emphasis).
- At , their Honours listed the significant propositions stated by Dixon J in Birmingham, and in other authorities as follows (my emphasis) –
- (i)The disposition of property by the first party under a will in the agreed form and upon the faith of the survivor carrying out the obligation of the contract attracts the intervention of equity;
- (ii)That intervention is by the imposition of a trust of a particular character;
- (iii)The subject matter is “the property passing [to the survivor] under the will of the party first dying”;
- (iv)That which passes to the survivor is identified after due administration by the legal personal representative whereupon “the dispositions of the will become operative”;
- (iv)There is a “floating obligation” over that property which has passed to the survivor; it is suspended during the lifetime of the survivor and “crystallises” into a trust upon the assets of the survivor at death.
- At , their Honours observed that Bigg had been criticised for finding a ground of equitable intervention by declaration of constructive trust when the appropriate action was no more than for damages for breach of the agreement – referring in a footnote to an academic article, “Rickett “Extending Equity’s Reach through the Mutual Wills Doctrine?”, (1991) 54 Modern Law Review 581 at 583 – 584. Although their Honours gave Bigg limited consideration, their observations about it were consistent with the imposition of a constructive trust remedially and not otherwise.
- Also, relevantly for my purposes, Gleeson CJ considered the argument that the effect of the MWA was that the deceased was not the beneficial owner of any property upon his death and that there was, therefore, no estate of the deceased within the meaning of the Act. His Honour observed at  that that argument confused the position of the deceased with that of his surviving wife. His Honour referred to the relevant principles as those set out by Dixon J in Birmingham v Renfrew – namely, that the doctrines of equity operated on the conscience of the survivor in the case of mutual wills, “giving rise to a floating obligation, suspended during the lifetime of the survivor, which descends upon the assets of the survivor at the death of the survivor and then crystallises into a trust”. His Honour then noted that the appeal concerned the estate of the first to die – not the survivor. At , his Honour explained that the Act imposed a restriction on freedom of testamentary disposition. Thus, a promise to make a testamentary disposition was subject to the potential operation of the Act. The deceased’s estate was available to meet an order under the Act in the daughter’s favour. Kirby J agreed with Gleeson CJ.
- Callinan J dissented. His Honour held that it was for Parliament, and not the courts, to deal with the problems created by the making of an MWA which meant that an application under the Act would have a nil return. In the course of his dissenting judgment, his Honour considered the nature of the rights and interest (if any) created by mutual wills. At ff, his Honour discussed Dixon J’s analysis in Birmingham v Renfrew and his Honour’s reference to the “floating obligation”. Callinan J continued at  (my emphasis) –
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.
- At  his Honour referred to jurisdictions which had intervened to permit a court to make an order for provision out of property willed to a promisee by way of an MWA. In that context, his Honour referred to a report of the Queensland Law Reform Commission which “expressly accepted that absent anti-avoidance provisions, property the subject of a contract to leave a specific benefit by will was caught by the contract and gave rise to a specifically enforceable obligation against the estate as a result of the decision of the Privy Council in Shaefer”. His Honour observed that that understanding of Shafer had been accepted in at least one leading Australian text – Jacobs’ Law of Trusts in Australia.
- Also, Callinan J observed at  that Dixon’s reasoning demonstrated that mutual wills created “useful and enforceable equitable obligations even though the available estate may be diminished by inter vivos transactions not having as their object the defeat of the equitable interests created by the mutual wills”. I note that the MWA in this case anticipates some diminishment of the property the subject of it.
- More significantly, his Honour’s comparison of Dixon J’s floating obligation with a floating charge does not assist James in this case. On his Honour’s comparison, the defined event, which would cause the floating obligation to “crystallise” into a trust, would be, in my view, either Annabel’s death or her fraud – neither of which have occurred.
Bauer & Ors v Hussey & Anor  QSC 269
- In this case, Daubney J made a declaration that certain property of an estate was held on constructive trust.
- Walter and Thelma Bauer married in 1967. It was a second marriage for each of them. Walter had three children of his first marriage (the plaintiffs). Thelma had two children of her first marriage (the defendants). In 1973, Thelma acquired property at Buderim, upon which she and Walter built a house. In 1984, Walter acquired a unit at Mooloolaba, which he used as an investment. The Buderim property and the Mooloolaba unit were their only assets of substantial value.
- His Honour found that Walter and Thelma entered into an oral MWA in 1984, in pursuance of which they agreed to preserve the Buderim properly and the Mooloolaba unit during their lifetimes; and executed mutual wills which were for the ultimate, equal benefit of their children.
- Walter died first, not having revoked his will. During her lifetime, in breach of the MWA, Thelma transferred title in the Buderim property to her daughters; revoked her mutual will; and executed two new wills, the last of which gave the Mooloolaba unit to Walter’s children and left the residue of her estate to her daughters.
- Thelma’s daughters sold the Buderim property for $840,000.
- Walter’s children applied for a declaration that the defendants held the proceeds of the sale of the Buderim property on a constructive trust for the plaintiffs and the defendants as tenants in common in equal shares; and a similar declaration in relation to the Mooloolaba unit.
- In finding for the plaintiff and making relevant declarations and ancillary orders, Daubney J considered the doctrine of mutual wills. His Honour summarised the doctrine at  as follows –
… [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.
- His Honour noted that the doctrine was first articulated in Dufour v Pereira, by Lord Camden, and followed in Birmingham v Renfrew.
- His Honour spend some time considering whether Walter and Thelma had in fact agreed to make mutual wills, ultimately concluding that they had. Thelma was not therefore permitted, in equity, to deal with Buderim House contrary to their MWA. His Honour gave the plaintiffs the declaratory relief they sought. Again, the trust was imposed to remedy a fraud.
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
- In addition to the authorities analysed above, James also relied upon this paper, and in particular paragraphs , , ,  and  of it.
- This paper did not clarify Annabel’s status for me.
- Whilst some of the statements made in it might be taken at face value as implying that the property the subject of an MWA is impressed with a trust upon the death of the first party to the MWA to die – whether or not the survivor committed a fraud upon the deceased – those statements were supported by reference to cases which concerned a court being asked to remedy a breach, or avoid a potential breach, of an MWA. And, as mentioned, the paper included a quote from Flocas v Carlson which contained a statement directly contrary to the applicant’s submissions.
- Also, in my view, what mattered as much as whether it was correct to cast Annabel as a constructive trustee of the property the subject of the MWA was the scope of her duties and responsibilities as such a trustee. Neither Le Miere J’s paper, nor the authorities upon which James relied, addressed that critical issue.
- At , explaining the purpose of his paper, Le Miere J observed that mutual wills have been criticised by academics and practitioners; and that while case law made the conditions for mutual wills clearer, important areas of controversy remained, which his Honour’s paper explored.
- During his Honour’s discussion of the nature of mutual wills, he distinguished between the “floating trust” or “floating obligation”, which arose upon the death of the first to die, and the “crystallisation” of the trust upon the death of the survivor (see ). At  his Honour said that the constructive trust was imposed “as a means of preventing the survivor from acting fraudulently by acting inconsistently with the agreement”.
- As noted, some of his Honour’s statements in the paper suggested the imposition of a constructive trust other than remedially. For example, at  his Honour said –
 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.
- But that statement may be contrasted with his Honour’s reference at  to the “invoking” of a constructive trust “to analyse the consequences of a breach” of an MWA.
- One of the controversies addressed by his Honour was the question of when the obligation bound the survivor (paragraphs  – ). The applicant relied upon three of the paragraphs under this heading – paragraphs ,  and  – but none assists him.
- In paragraph , his Honour’s discussion of a trust arising upon the death of the first testator is footnoted by a reference to Re Hagger  2 Ch 190. In that case, a husband and wife (John and Emma) made a joint will concerning their joint property. In essence, they each agreed to give everything they possessed at their death to the other and that, upon the death of the second to die, their property would pass to certain named beneficiaries (the Ultimate Beneficiaries). Emma died first (in 1905). Her husband took under her will. Then three of the named beneficiaries died (the Deceased Beneficiaries). In 1921, John executed another will, leaving his property to certain persons, several of whom were not Ultimate Beneficiaries under the joint will. John died in 1928. The joint will and his 1921 will were proved. His 1921 will was referred to as a codicil to the joint will.
- After John’s death, questions arose about the interpretation and effect of the joint will, and the plaintiff (one of the executors and trustees of the joint will) took out a summons asking whether John’s estate was subject to the trusts of the joint will (and to be distributed accordingly); and whether the property bequeathed to the Deceased Beneficiaries was payable to their legal personal representatives.
- Referring to Dufour v Pereira, Clauson J held that it was clear that the survivor (of John and Emma) would be treated as a trustee “in this Court” (that is, the Chancery Division of the High Court of Justice) and would not be allowed to do anything inconsistent with the provisions of the joint will. His Honour held that John took the property according to the tenor of the joint will and there was no lapse by reason of the death of the Deceased Beneficiaries. In other words, a trust was imposed to enforce the MWA in circumstances of its breach.
- Paragraph  of the paper referred to Re Goodchild and Birmingham v Renfrew and the “floating obligation” or “floating trust” which crystallised after the death of the survivor. It will be recalled that Re Goodchild and Birmingham concerned surviving spouses reneging on MWAs.
- The footnotes to paragraph  included a reference to Flocas v Carlson at , which is the paragraph including the statement that it is plain that the property the subject of the promise is not held on trust during the survivor’s lifetime.
- Thus, the propositions contained in the paragraphs upon which James relied were drawn from cases in which either a survivor’s executor was concerned to avoid a breach of an MWA, or a breach of an MWA was alleged. They do not provide support for his application.
- Paragraphs  and  fell under the heading “What property is covered by the constructive trust?”. I acknowledge that statements of his Honour under that heading suggested the imposition of a trust upon the property of the survivor, upon the death of the first to die, irrespective of fraud. However, in  his Honour again referred to, and endorsed, paragraph  of Flocas v Carlson –
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 … .] 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.
- Another area of controversy addressed by his Honour was “What restraint is there on the survivor to dispose of the trust property?” (paragraphs  – ). It has been argued that, even if an MWA does not refer to limits upon the survivor’s power to dispose of the property the subject of the MWA during their lifetime, there must be some limits imposed, otherwise the whole purpose of the MWA may be defeated. This controversy is primarily around whether there ought to be a distinction between inter vivos gifts which are testamentary in character and those which are not. The quote from Flocas v Carlson which caught my eye was included in this discussion.
- Before setting out the quote from Flocas v Carlson, his Honour considered, and quoted from, an article by Professor L A Sheridan (L A Sheridan, “The Floating Trust: Mutual Wills” (1977) Alberta Law Review 211, 231). At , his Honour referred to Professor Sheridan’s analysis of the nature of the trust which binds the property the subject of the MWA (footnotes omitted, my emphasis) –
 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.
- Le Miere J continued (some footnotes omitted, my emphasis) –
 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  CH 212  …] to the analysis of Norris J at first instance in Olins v Walters. [Footnote 76: Olins v Walters  EWHC 3060 (Ch)  …] 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).
 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.
- His Honour went on to discuss: (a) authorities to like effect, which made the point that the terms of the agreement dictated the nature and extent of the property to which the trust attached and the rights of the survivor to deal with it during their lifetime; and (b) authorities which contrasted inter vivos dispositions of testamentary character with inter vivos dispositions of non-testamentary character.
- At , his Honour set out the quote from  of Flocas v Carlson to which I have referred several times. His Honour said (my emphasis) –
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  VSC 221 ]
- Before considering Flocas v Carlson in more detail, I note that of the controversy, Le Miere J concluded as follows (at  of the article) –
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.
- It is worth noting that the proposition that, in the absence of an express promise not to, a survivor may dispose of the property the subject of the MWA in any way (that is not testamentary in nature or directly contrary to the terms of the MWA) is inconsistent with a requirement that the survivor account to those who are ultimately to benefit under the MWA for the property during the survivor’s lifetime.
- The balance of his Honour’s article touched only lightly on the issues for me. His Honour considered several academic papers on mutual wills agreements, including, of note for my purposes, an article by Dr Ying Khai Liew, “The Ambit of the Mutual Wills Doctrine” (2016) 132 Law Quarterly Review 664. In that article, under the heading “Agreement”, Dr Liew referred to the mutual wills doctrine as “[t]he principles on which the court acts in imposing the trust to give effect to the agreement to make and not revoke mutual wills”, reinforcing, in my view, the remedial nature of the trust in this context.
Flocas v Carlson and others (as executors of the will and estate of Marjorie Lillian Swift)  VSC 221
- I have referred several times to McMillan J’s statement that it is “plain” that the property the subject of an MWA is not held in trust during the survivor’s lifetime. That statement caught my eye because it contradicted expressly and emphatically James’ primary contention. I was therefore keen to ensure that I understood clearly the context in which her Honour made it, including because:
- The statement was made in the course of a judgment which gave detailed and scholarly consideration to mutual wills agreements, by one of the two justices in charge of the Trust, Equity and Probate, and Testator Family Maintenance lists in the Supreme Court of Victoria;
- The plaintiff’s (Flocas’s) submissions presented as alternatives for McMillan J (a) the proposition that a survivor was a constructive trustee of the property the subject of an MWA during their lifetime and (b) the proposition that the survivor was bound by a floating obligation during their lifetime, which crystallised into a trust upon their death – matters of obvious relevance in this case.
- Having decided to consider Flocas v Carlson in detail, I called for submissions from the parties about it (which are discussed below).
- The facts of Flocas v Carlson and others were as follows. Robert and Marjorie were siblings who jointly owned certain property, including a house at Alfred Street, which had been the family home for decades. The plaintiff, Robyn, was Robert’s only daughter.
- On 9 February 1996, Robert, who was dying at home, and Marjorie executed wills prepared by a solicitor, who took instructions at Robert’s bedside. Robert’s will left his half-interest in the Alfred Street property to Marjorie, and Marjorie’s 1996 will left a half-interest in the Alfred Street property to Robyn. Robert died within days of executing his will.
- In 2001, Marjorie revoked her 1996 will and executed another one, which left Robyn a pecuniary legacy of $25,000 only. Marjorie died on 27 January 2012. The Alfred Street house was then valued at $1.5 million.
- Robyn sought more from Marjorie’s estate. She contended that Robert and Marjorie had reached an oral agreement, on 9 February 1996, that Robert would leave his half interest in the Alfred Street property to Marjorie by will, on the basis that she would leave it, by her will, to Robyn (an alleged, oral, MWA). Robyn sought a declaration that one-half of the Alfred Street property was held on by Marjorie on constructive trust for her “as and from Robert’s death”. In the alternative, she sought a declaration that the property was impressed with a “fiduciary obligation which crystallised into a constructive trust on Marjorie’s death”. Further in the alternative, she brought two claims in proprietary estoppel. She also brought (as the “last arrow in her quiver” ) a claim under the Administration and Probate Act 1958 (Vic) for further provision from the estate (of one-half of the Alfred Street house or half of its proceeds of sale).
- Among their arguments in defence, the defendants denied that Robert and Marjorie made an MWA.
- There was a contest at trial about the nature of the agreement between Robert and Marjorie which Robyn had to prove to succeed. The plaintiff submitted that it was sufficient to prove an agreement enforceable in equity. The defendants submitted that it was necessary to prove that the agreement was a contract, or at least that Robert and Marjorie intended to create binding legal obligations; and a sufficiently certain agreement.
- Her Honour considered the authorities and concluded that, to succeed, Robyn had to prove that the agreement between Robert and Marjorie was a contract. Although that issue does not arise here, it was necessary for me to consider in detail her Honour’s analysis of the relevant authorities in reaching that conclusion to ensure I appreciated the point her Honour made in paragraph .
- Her Honour first considered Dufour v Pereira (discussed above); and then Lord Walpole v Lord Orford (1797) 3 Ves 402. The latter case concerned an alleged MWA between Horatio and George made in 1756, in pursuance of which both executed wills leaving their estates ultimately to “the surviving male line”. Horatio died without revoking his will. George executed a codicil to his will in 1776 which was not consistent with the MWA in that it ranked George’s uncles ahead of Horatio’s descendants. George died in 1791.
- Horatio’s son and grandson claimed to be entitled to George’s estate under the 1756 will. George’s uncles claimed under the 1776 codicil. Ultimately, the 1756 agreement was excluded by the parole evidence rule, and Horatio’s son and grandson failed. But before the case was heard, Hargrave was briefed to write an opinion about how Horatio’s son and grandson might claim under the 1756 agreement. The relevant chapter in Juridical Arguments is Hargrave’s opinion from 1797, in which he advised that the claim was likely to be successful. His prediction was wrong. But, her Honour explained, his opinion has been referred to in many of the later leading authorities on mutual wills, including by Dixon J in Birmingham v Renfrew (as I have discussed above).
- Hargrave was of the opinion that there was sufficient evidence of an MWA between Horatio and George and that there were two grounds upon which it could be enforced, namely, an equity founded upon “compact or agreement” or an equity which “restrains persons taking a benefit of a will from acting against its provisions”. In terms of the relief available (as I have discussed above at ), Hargrave suggested that the simple question was whether a court of equity would “suffer this breach of 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”.
- Lord Loughborough who heard the case doubted that the relief sought was available on the bill in equity as framed for certain technical reasons. His Lordship distinguished Dufour v Pereira and was not satisfied that an MWA was established on the evidence. Although there was an “honourable arrangement”; it could not have been intended to be legally binding, nor was it sufficiently certain.
- Her Honour considered subsequent decisions in the English probate courts, where the question was often whether an agreement to make mutual wills had the effect of preventing a grant of probate of a later will – the courts generally concluding that it did not (although there were remedies available in other divisions).
- Then her Honour considered decisions of the High Court and Privy Council, including Birmingham v Renfrew. In her Honour’s discussion of that case, her Honour observed that Dixon J had “confronted an unusual aspect of the doctrine”, namely, the floating nature of the obligation.
- Her Honour discussed Re Cleaver; Bigg v Queensland Trustees Limited, Barns v Barns and other Australian decisions – focusing on the nature of the agreement which has to be proved to invoke the doctrine.
- Her Honour drew from her extensive review of the authorities the principles which governed the proof and operation of the agreement alleged by the plaintiff Robyn – the first of which was that the agreement must be a contract. Relevantly, in this context, her Honour described the constructive trust as a remedial device. Her Honour said (my emphasis) –
 … 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.
 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.
- Her Honour then considered various types of promises to dispose of property by will, which included MWAs where the property to be left under the survivor’s will was identifiable/ascertained property and MWAs where it was only ascertainable on the survivor’s death. Her Honour explained that the distinctions were important for the basis of the relief sought. Her Honour said (my emphasis) –
 …[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.
 … 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.
- One of the several other principles identified by her Honour was the principle that: “The agreement cannot prevent a grant of probate of a later will executed in breach of the agreement”. During her discussion of that principle, her Honour emphasised the remedial nature of a constructive trust –
 … 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.
- During her discussion of another principle, namely that: “The agreement may be enforced by a third-party beneficiary” her Honour again referred to the remedial nature of the constructive trust in the context of a discussion of the explanations for the inconsistency between the doctrine of contract and the doctrine of mutual wills (in that an MWA, but not a contract, is enforceable by a third party) –
 … A more sophisticated explanation may be … as Dixon J postulated in Birmingham v Renfrew, to enforce the constructive trust arising as a remedial device …
- After discussing the principles clearly established by the authorities, her Honour then returned to Dixon J’s “floating obligation” in paragraph , which included the statement about it being plain that the relevant property was not held on trust during the survivor’s lifetime – the survivor being entitled to retain its income or dispose of its capital.
- Thus, her Honour’s statement that the property the subject of the promise is not held on trust during a survivor’s lifetime was based on the survivor’s entitlement to beneficial ownership of the property during their lifetime – a status inconsistent with a trust (express or constructive) – see  above.
- Her Honour went on to conclude that the doctrine of mutual wills had been satisfied in Flocas. Her Honour further held that the defendants were estopped from denying the agreement between Robert and Marjorie and, as executors of Marjorie’s estate, they had to give effect to the expectation created in Robert by Marjorie’s promise, and transfer the one-half interest in the Alfred Street property to Robyn. (If the matter had come down to the application for further provision, the plaintiff would have failed for reasons which I do not need to detail.)
- Having found in favour of the plaintiff’s claim on the basis of the MWA or, in the alternative, estoppel, her Honour declared that the executors of Marjorie’s estate held the Alfred Street property on a constructive trust as to one of two equal undivided shares as tenants in common for the plaintiff beneficially and made consequential orders to ensure that the plaintiff received her half-interest in Alfred Street.
Parties’ submissions on Flocas v Carlson
- James argued that McMillan’s comments were obiter in another context and inconsistent with Dixon J’s comments in Birmingham v Renfrew about modern equity attaching to the assets a constructive trust upon the death of the first testator to die. He then argued, for the first time, that the “floating obligation ought to give rise to the disclosure sought by the applicant”.
- Annabel submitted that McMillan J’s observation was consistent with Dixon J in Birmingham v Renfrew: the floating obligation did not crystallise into a trust until the death of the survivor. Also, she submitted, the survivor being a trustee was inconsistent with the survivor’s absolute ownership of the property.
- In reply submissions, contrary to the position he took at the hearing, James implicitly asserted that there had been “fraud” and that there was therefore a need for equitable intervention. He submitted –
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.
- I wish to emphasise that the hearing proceeded on the basis that there was no evidence of fraud or anticipated fraud by Annabel. James made it plain that the point of the application was to allow him to keep an eye on Annabel in case she tried to avoid her obligations under the MWA.
- Obviously, Annabel has had no opportunity to respond to the fresh argument made by James in reply – nor was the application brought on the basis. I will not therefore spend any time on it apart from observing that it reveals a misapprehension of the role of equity.
Conclusion – Annabel does not hold the property the subject of the MWA on constructive trust for James during her lifetime
- This application is not to be decided in the abstract. The first question is whether, in this case, having regard to the terms of the MWA, Annabel is a constructive trustee of the property the subject of the MWA during her lifetime –
- (a)in the absence of fraud or anticipated fraud by Annabel;
- (b)where the property the subject of the MWA is not specified property;
- (c)where the property the subject of the MWA is the deceased’s property inherited by Annabel plus her own property (the “Combined Estate”);
- (d)where the MWA sets out some limits to the way in which Annabel might deal with the Combined Estate but where it anticipates that the assets or income of the Combined Estate will be diminished over Annabel’s lifetime, including to allow her to maintain the standard of living to which she is accustomed and for her necessary health and aged care; and
- (e)where the MWA anticipates that that which will be left to James and his siblings and step-siblings will be the residue of the Combined Estate – which cannot be ascertained until the time of Annabel’s death.
- It is in that context that the authorities must be considered and applied.
- Relevantly for my purposes, in my view, they establish the following propositions (where: “T1” and “T2” are the parties to the MWA; T1 is the first to die and T2 is their survivor; and B is the ultimate beneficiary under their MWA):
- (a)An MWA is an agreement between T1 and T2 to make, and not revoke, a will in a certain form (mutual wills), for the ultimate benefit of B.
- (b)An MWA may, and often does, allow T2 to enjoy the property the subject of the MWA absolutely during their lifetime.
- (c)A mutual will is a revocable instrument – notwithstanding the promises made by T1 and T2 not to revoke it.
- (d)If a mutual will is revoked and a later will is made, the existence of an MWA will not prevent probate being granted of the later will.
- (e)However, equity will intervene to prevent a fraud – fraud in this context meaning fraud committed by T2’s failing to adhere to the terms of the MWA, including (for example) by revoking T2’s mutual will or by T2’s disposing of the property the subject of the MWA during T2’s lifetime contrary to it.
- (f)Where there has been fraud equity would, if it could, decree specific performance of the MWA – but that is not possible in this context. Equity instead may impose a constructive trust upon the property the subject of the MWA, to ensure that it is dealt with in accordance with the MWA for B’s benefit. In other words, because a decree of specific performance is not possible, equity imposes a trust to achieve the same result.
- (g)The fraud is commonly discovered upon the death of T2, when a later will, revoking the mutual will, is produced.
- (h)In that case, whilst the trust is conceptualised as arising upon the death of T1 – T1 having abided by the terms of the MWA – it is T2’s executors (or those taking under the later will) upon whom the constructive trust is imposed.
- (i)But the remedy of a constructive trust is only necessary if T2 revokes his or her mutual will.
- (j)In the absence of fraud, the property the subject of an MWA in terms similar to the agreement in this case is not held on trust by the survivor during their lifetime. Trusteeship would be inconsistent with T2’s absolute ownership.
- (k)The property the subject of an MWA in terms similar to the agreement in this case is held by T2 absolutely, subject to a floating obligation to deal with the property only in accordance with the MWA.
- (l)The floating obligation crystallises into a trust upon T2’s death and T2’s personal legal representatives are bound to deal with the property the subject of the MWA in accordance with the MWA.
- (m)Although T2’s personal legal representatives may be considered constructive trustees of the property the subject of the MWA, in the absence of fraud, the property will pass in accordance with T2’s unrevoked mutual will and there will be no need for equitable intervention.
- (n)It is only where it becomes necessary to enforce the MWA – that is, in the face of T2’s defiance of its terms – that equity will intervene and may invoke the mechanism of the constructive trust to enforce T2’s promise to T1 to confer a certain benefit upon B.
- If I am correct in my analysis of the authorities, then Annabel is not a constructive trustee of the property the subject of the MWA; and James cannot succeed in this application. Her absolute ownership of the property is inconsistent with trusteeship.
- Even if I am wrong, and a constructive trust was imposed upon the property the subject of the MWA upon the deceased death, casting Annabel as constructive trustee of it from that moment, the terms of the MWA would define the nature of her trusteeship.
- Under the MWA, she is entitled to full enjoyment of the Combined Estate during her lifetime, within certain limits, and it is anticipated that she will diminish the property. Even if James were able to persuade me that section 8 of the Trusts Act 1973 applied, Annabel’s right of enjoyment under the MWA, even as trustee, is inconsistent with my imposing upon her a requirement to account to James for the Combined Estate during her lifetime.
- That is not to say that James and the other MWA beneficiaries have no interest in the property the subject of the MWA. Their interest arose upon the death of the deceased. But, during her lifetime, Annabel is entitled to full enjoyment of the Combined Estate, subject to her obligation to abide by the terms of the MWA. That is an obligation which equity will enforce, if necessary, including by way of imposing a constructive trust upon her or her personal representative. But in the absence of fraud by Annabel, the obligation to which Annabel is subject, whilst the lawful absolute owner of the Combined Estate, even if she is properly described as a constructive trustee, is not the equivalent of a willing trustee’s obligation to the beneficiaries of an express trust. In my view, her obligation does not include an obligation to account to James for the property during her lifetime and I would not order her to do so.
- Having reached that conclusion, I do not need to say anything more about the issue identified at (b) of these reasons beyond my comments at ,  and .
- James’ application is refused. I will hear the parties as to costs.
 Intending no disrespect, I have referred to the parties by their first names to avoid confusion.
 With James to pay the estate’s costs.
 In correspondence tendered before me.
 And his siblings and step-siblings.
 In the respondent’s written reply submissions, dated 9 February 2022.
 Or its shares, or any changes in her approach to its valuation over time.
 My references hereafter to “marriage” or “marriages” are to be taken as including other unions or relationships.
 My references here and hereafter to “spouse” or “spouses” are to be taken as including partners in other unions or relationships.
 These are examples only.
 In the example case in which only one spouse to a second marriage brings children to the marriage.
 Given in the context of another case, Lord Walpole v Lord Orford, which is discussed by me below.
 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”.
 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.
- Published Case Name:
Forster v Forster
- Shortened Case Name:
Forster v Forster
 QSC 30
08 Mar 2022
- Selected for Reporting: