Identical Wills are not Mutual Wills

Campbell v Campbell [2015] NSWSC 784 In April, May and June 2015, the Supreme Court of NSW considered a claim by a daughter (‘the plaintiff’) who alleged that her mother was not entitled to deal with a property in Mosman (‘the Property’) because her late father and her mother had made an agreement to leave the Property to their 4 children equally upon death. Historical evidence going back as far as the mid 1970’s was required to be examined in order to determine the facts in the matter. A complex company and family history and a number of different wills made at various times were reviewed by the Court in order to address the plaintiff’s claims. In the early 1980’s, wills made in similar terms were made by the father, Sir Keith and the mother, Lady Campbell. Sir Keith died unexpectedly in April 1983. After Sir Keith’s death, the Property at Mosman was sold to Lady Campbell from a company Sir Keith had been involved in. The sale followed an acknowledgement from the company that there was a gentleman’s agreement with Sir Keith regarding the Property. One of the plaintiff’s claims was that prior to the sale to Lady Campbell, an option agreement existed which would have allowed Sir Keith and his family to purchase the Property from the company under certain conditions. Whilst there was evidence of a draft, and even a fourth draft of an option agreement, no evidence could be located that indicated an option agreement was ever signed by anyone. Lady Campbell made wills after Sir Keith’s death and the Property was re-developed over a number of years. Some of Lady Campbell’s children were involved in the re-development and there were a series of loans and mortgages worth millions of dollars granted between them in order to pay re-development costs. Some of the title to the Property was also transferred in these dealings. The plaintiff lodged caveats on title to the Property and legal proceedings followed. The plaintiff contended there was a binding agreement with Lady Campbell to the effect that Lady Campbell would leave the Property to her 4 children equally in the event of her death. Alternatively, the plaintiff argued that Sir Keith and Lady Campbell had made an agreement to make mutual wills such that the survivor of them would leave their estates to their 4 children equally. Mutual wills are wills made by people as a result of an agreement to leave their estates in a particular way, including that they will not alter their will without the prior agreement of, or notice to, the other. Mutual wills are legally binding even after the death of the other person. All wills may be revoked or cancelled, but if a mutual will agreement has been made, a breach of the agreement may give the other person or beneficiaries a right to enforce the agreement or claim damages in Court. Wills made in identical terms are not, however, automatically deemed to be mutual wills. There must be evidence of an agreement to make the terms of the wills irrevocable or unable to be cancelled. One of the main questions for the Court in this matter was whether there was a mutual will agreement, and whether there was a binding agreement that meant Lady Campbell was required to leave the Property to her 4 children equally. If so, the dealings with the Property may be found to be a breach of those agreements, and also a breach of trust. Some of the evidence about the alleged agreements related to oral conversations and conduct undertaken by the parties after the agreements were said to have been made. Implied terms in the alleged agreements were also sought to be relied upon to the effect that Lady Campbell would not dispose of or encumber her interests in the Property. The defendants, Lady Campbell and her 3 other children denied the existence of any agreements in relation to the Property or the existence of any mutual wills. The Court considered the plaintiff’s evidence and was highly critical of the recollections given in evidence and under cross-examination. The judge said of her credibility, I found the plaintiff to be an entirely unsatisfactory witness. She gave evidence which I regard as frankly implausible and, worse, untruthful’. He concluded that he ‘simply could not accept her as a truthful witness on important issues unless there is independent corroboration of her testimony’. Other witness evidence was carefully scrutinised and unsurprisingly, the recollections of various conversations and meetings that were held in the 1970’s, 1980’s and 1990’s varied from witness to witness. The Court examined prior wills made by Lady Campbell and also other evidence available from around the same time as the agreements were said to have been made. Certain findings about whether any agreements about the Property were realistically in existence at any time were able to be made. The judge agreed with the defendants that in a 1996 will, Lady Campbell dealt with the property in her will as if there was no binding agreement in relation to the Property. Lady Campbell gave evidence, and the judge also noted, that the plaintiff had assisted prepare a will for her mother in 1983, which was after Sir Keith’s death. Notably, the will did not make any reference to a binding agreement regarding the Property or a mutual will arrangement with Sir Keith. It was found that no testamentary promise was made to the plaintiff that the Property would be left equally to all children in Lady Campbell’s will. The judge also noted that over the course of 20 years, the plaintiff had not told anyone of her belief that there was some form of binding arrangement with respect to the Property. Although having found that no promise or binding agreement existed in relation to the Property, the judge also indicated that in his view, there was no intention to create legally binding relations by either agreement or by the conduct of the parties. The absence of any reference in writing to any alleged agreements was considered to be significant. As part of the purchase of the Property from the company by Lady Campbell, shares that could have been made available to the plaintiff pursuant to the alleged options agreement were utilised to pay some of the purchase price. The judge determined that as the option agreement did not exist, there was no opportunity for the plaintiff to access the shares. This in turn meant there was no consideration (which has a legal meaning) given by the plaintiff to support an agreement to leave the Property equally to all 4 children. The indefeasibility of title to real property was also considered by the judge, which in other words, means that a registered proprietor (owner) has an interest in their property paramount to all others. Only limited exceptions apply to this principle, including where there is a defect in title or there is some fraud involved. As Lady Campbell was the sole registered proprietor of the Property, she was free to do with it as she wished. This included being able to sub-divide it, mortgage it and transfer a share of the title to one of her daughters. One of the arguments advanced by the defendants was that the plaintiff’s claim was significantly delayed, and as such, she had slumbered on her rights. The plaintiff had been on notice of proposed re-development works for over 8 years, and yet had not acted to protect the interests she claimed she had in the Property. The judge determined that it would be inequitable to allow the plaintiff to have rights in respect of the Property, although he did not indicate whether the legal doctrines of laches, acquiescence and estoppel were specifically relied upon in making that finding. A promise not to revoke a will is a critical factor when making a mutual will with another. The judge found there was no evidence of an intention or promise to make mutual wills. Whilst Sir Keith and Lady Campbell may have made wills in similar, if not almost identical terms to each other, they did not intend the wills they made to bind each other or to be irrevocable after their deaths. Some discussion also resulted from the cross-examination of Lady Campbell regarding the difference between being legally bound, and honour bound to make your will in a certain way. The judge decided that ‘[t]he fact that a husband and wife make wills at the same or similar times is no basis for inferring or implying, without more, the existence of a promise between them never to revoke those wills’. A further argument the defendants raised against the existence of any mutual will agreement, which is a form of contract, was that there was an imbalance in bargaining power between Sir Keith, an experienced business man, and Lady Campbell, who had little tertiary education and had not been in professional employment since the age of 24. The judge rejected that argument on the basis that the arrangements were not such that one person took advantage of the other, and it was not a negotiation. Ultimately, the judge dismissed the whole of the plaintiff’s claim and determined that:  

  • no options agreement existed to purchase the Property;
  • no agreement to leave the Property equally to the 4 children was ever made;
  • there was no intention to enter into legally binding relations between the parties;
  • there was inadequate consideration to support any alleged agreement (even if one had existed);
  • the absence of any agreement in writing could not be overcome by the plaintiff;
  • there was no fraud or reason to question Lady Campbell’s ownership of the Property;
  • the plaintiff delayed her claims for too long which prevented her from any chance of being granted relief by the Court; and
  • there was no mutual wills agreement made between Sir Keith and Lady Campbell.

Although many of the issues in this matter were found to be largely illusory, the questions that arose about when and in what circumstances wills were made could have been much clearer had wills been prepared with a solicitor and appropriate records kept. The process of taking instructions, carefully preparing a will and ensuring it is understood by the will-maker is important. When shortcuts are taken, even in families with no shortage of access to competent legal advice, costly disputes can result.

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