WHERE THERE’S A WILL, THERE’S A WAY
or is there?

In recent years the court has examined on several occasions the agreements that give rise to
mutual wills.     Edward Bragiel looks at Healey v Brown and asks if the court reached the
right result.     If it did, there is a significant new pitfall in the preparation of such wills
(taken from Issue No 21  – October 2002
 

Introduction
The term `mutual wills` is properly used to describe the situation where two people (T1 and T2) make a binding agreement whereby each undertakes to make their last will in the same form leaving property to particular beneficiaries. The most common situation is where T1 and T2 agree to make wills leaving their property to the other, if the other survives, and in default o a beneficiary (B) but it is not essential that the surviving testator (T2) should receive property under the will of the first testator to die (T1)1
. If T1 dies without having altered or revoked his will he has performed his part of the bargain and this creates an obligation on the part of T2 that he too will adhere to the agreement.

The legal basis of mutual wills straddles contract and trust because it is first necessary to find a contract2 and thereafter an equitable obligation arises out of the performance of the agreement by the first testator leaving his will unrevoked at death.

`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 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…. Good faith and conscience are the rules, by which every transaction is judged [by the 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.`3

However, as emerges from the decision in Healey v Brown4, exactly how those two concepts operate within the doctrine has perhaps not hitherto been sufficiently analysed.

The reason why the above conceptual problem became relevant in Healey was as a result of the court holding that an agreement to make mutual non-revocable wills that contain a bequest of land was a `contract for the … disposition of land`so that, in order to have any effect as a contract, it had to comply with the formal requirements set out in s.2 The Law of Property Miscellaneous Provisions Act 1989.

In Healey the agreement did not comply with the 1989 Act and accordingly the court had to consider the consequences of this and in particular whether the ineffective agreement nevertheless gave rise to a constructive trust and if so the extent of such trust. As to this it was held that a constructive trust did arise but one that was limited in extent in such a way that it could be said to deprive the agreement of much of its intended effect (see below). It is submitted that the decisions

  1. that the 1989 Act applies to agreements between testator’s to make mutual wills whenever such wills contain a bequest of land and
  2. as to the extent of the constructive trust that arises in such circumstances are both questionable and produce unfair results.

Healey v Brown – the facts.
Mrs Brown and her husband, Thomas, (who were beneficial joint tenants of their matrimonial home) agreed to make mutual wills in identical form. Each left the entirety of her or his estate to the survivor and, in the event of being the survivor, left to the claimant, Ms. Healey, (who was Mrs Brown’s niece) all her or his interest in the matrimonial home. The remainder of the estates were left to the Defendant, Paul Brown (who was Mr Brown’s son by an earlier marriage). In pursuance of such agreement they executed identical wills in 1996.

In January 1997 Mrs Brown died having left her will unrevoked. However in August 1997 Mr Brown transferred the property from his sole name into the joint names of himself and the Defendant for no consideration. In 1999 Mr Brown died having made no alteration in his will. However the disposition of the property into the joint names of himself and the Defendant in 1997 had the effect of defeating the object of the mutual wills agreement since on Mr Brown’s death the property passed to the Defendant by survivorship and Ms. Healey received no interest in it. Accordingly the Claimant contended that the property was held by the Defendant on trust for her and that she was entitled to have it transferred to her.

Healey v Brown – the decision.
There seems to have been no dispute that the agreement reached between Mr. and Mrs. Brown was sufficiently certain to be a contract
5. Furthermore it was accepted that Mrs. Brown’s action in leaving her will unrevoked provided consideration for Mr. Brown’s promise to leave a will in the same terms and that as a result it would be `entirely inequitable` for Mr Brown to frustrate Mrs. Brown’s expectations by after her death seeking to pass the property to the Defendant. In this regard the judge, David Donaldson Q.C. sitting as a Deputy Judge of the Chancery Division, seems to have approached the matter in the same way as if Mrs. Brown had effectively left her share of the property to Mr. Brown by her will and it is submitted that this was correct even though the property was held jointly and was held to have passed to Mr. Brown not by operation of Mrs. Brown’s will but by survivorship.

The crucial thing is that Mrs. Brown did nothing to alter her will in the belief that Mr. Brown would adhere to the agreement the object of which was to pass the property to the Claimant. Believing that the property was to pass to Mr. Brown on her death (it being irrelevant that she may have mistakenly believed that this was as a result of her will) she took no steps to change that. (In fact the agreement by Mr. and Mrs. Brown to make mutual wills leaving the property to each other and thereafter to Mrs. Healey may have operated to sever the joint tenancy so that Mrs. Brown’s interest did indeed pass to Mr. Brown under Mrs. Brown’s will).6

However even though the deputy judge proceeded on the basis that there had been a clear agreement between Mr. and Mrs. Brown, that Mr Brown’s voluntary inter vivos conveyance of the property circumvented the purpose of that agreement, and that it was entirely inequitable that this should occur, the result he reached did not achieve the objects of the agreement reached by Mr. and Mrs. Brown.

First the deputy judge held that although the agreement was clear and definite it was deprived of any legal effect as a contract because it was a contract for the disposition of an interest in land within s.2 Law of Property (Miscellaneous Provisions) Act 1989 but did not comply with the formal requirements of that section.

Secondly he went on to consider whether, nevertheless, equity could intervene to impose a constructive trust on the property in the hands of the Defendant (as successor in title to Mr. Brown). As to this he held that, while s.2(5) of the 1989 Act acknowledged that a constructive trust could arise notwithstanding non-compliance with the formalities set out in s.2, he was bound by Re Goodchild7 to confine any constructive trust that was imposed only to the property received by the second testator (i.e. Mr Brown) from the first testator (Mrs. Brown) and could not impose any trust on the second testator’s own property. Accordingly because one half of the property had belonged to Mr. Brown in any event only the half share formerly belonging to Mrs. Brown was subject to a trust and so the deputy judge held that the property in the Defendant’s hands was held by the Defendant for himself and the Claimant in equal shares. This of course did not achieve the object that was originally intended by the Browns, namely that the property should go to the Claimant.

s.2 Law of Property (Miscellaneous Provisions) Act 1989 and mutual wills.
The deputy judge’s finding that,

`there can be no doubt, as a matter of both principle and authority, that the agreement embodied in mutual non-revocable wills containing a bequest of land is a contract for the disposition of land[within the section]`,

is, it is submitted, open to question. The Australian case of Birmingham v Renfrew8 showed that the Australian courts did not favour the application of an analogous statute to mutual will agreements. The court in Birmingham v Renfrewdistinguished and disapproved an earlier Australia9 case in which an agreement to make a will in the claimant’s favour was held to be within the statute merely because the testator’s estate in fact consisted entirely of land. This approach was disapproved of in Birmingham where it was said that,

`a contract which does not in its terms concern an interest in land ought not to be held to be within the statute of frauds because a particular set of circumstances may bring about the result that the performance of the contract may involve some disposition of an interest in land`.

In Birmingham the decision was that the statute did not apply because the promise to make mutual wills did not contain any reference to land but was a promise to leave the entirety of the estate (whatever it was) in a particular way. The deputy judge in Healey v Brown distinguished Birmingham v Renfrewbecause in Healey the `bequest to the survivor was explicitly land`.

Such approach, however, could be said to be unsatisfactory in two ways. First, it tends to blur the distinction between the agreement and the contents of the wills (though it is appreciated that because the relevant agreement is to make wills in a particular form, the contents of the will could be relevant to construing the agreement). Secondly, and perhaps more importantly, it focuses on the form rather than the substance of an agreement, since if the testators agree in terms to leave `the entirety of their estate` in a particular way then, following the decision of Birmingham v Renfrew, which was not questioned in Healey, such an agreement will not be within the statute even though the entire estate or most of the estate happens to be land. The question will turn on the wording of the agreement. (In this regard one English decision in fact supports the view that a contract to make a will is within the 1989 Act wherever the wills dispose of land irrespective of how the agreement is framed (see Taylor v Dickens10, `the fact that property other than [a particular freehold property] would be included in the residuary estate does not … take the contract out of the statute` per HH Judge Weeks sitting as a Deputy Judge of the Chancery Division.) However it is submitted that this may not be followed since it does not seem to take account ofBirmingham v Renfrew and further would appear to strike down all agreements for mutual wills where land was involved).

In the view of the author there is force in the argument that the application of the 1989 Act to mutual wills should not depend on consideration of whether the agreement was to leave the `residuary estate` (which may include `Blackacre`) or to leave `Blackacre` and further force in the argument that the 1989 Act was not intended to apply to legal acts which could be said to have a predominant and/or independent legal object that was not to transfer land such as the making of wills or, to take another example, the compromise of litigation.

Constructive trust if the 1989 Act applies.
In deciding that, in the event that the mutual wills agreement was invalidated by non-compliance with the 1989 Act, the Deputy Judge held that he was bound byRe Goodchild to impose a constructive trust only in respect of property that Mr. Brown could be said to have received from Mrs. Brown. In doing so he expressly stated that it was not entirely clear to him why the general rule that a constructive trust could be imposed where an agreement did not comply with the 1989 Act
11 was arbitrarily limited in the case of mutual wills to only property received by the second testator from the first. Such a limitation was expressed to exist by Morritt LJ in Goodchild. However, while the decision in Goodchild that a constructive trust ought not to have been imposed on the property already owned by the second testator may have been justified on the facts of that case, there do not appear to be grounds for saying that there is a general principle that in mutual wills where there is some defect in the agreement the court will never impose a constructive trust on property already owned by the second testator.

The court in Goodchild was faced with a situation where the evidence failed to establish a clear and definite agreement between the two testators. In such circumstances it is readily understandable that the court was disinclined to find a constructive trust (which is imposed to fulfil a common intention in circumstances where it would be inequitable not to do so12). The fact that there was no evidence of any clear agreement to make mutual wills lessened the force of any argument based on common intention and lessened the argument that it would be inequitable for the second testator not to leave a will in the same terms as the first – a fortiori in so far as concerned his own property. However the court inGoodchild were not concerned with a situation where there was a clear agreement but the only defect was that it did not comply with the 1989 Act. That a constructive trust (of whatever extent is necessary) can be imposed in a situation where the 1989 Act has not been complied with is established by Yaxley v Gotts (a case that the court in Goodchild did not consider and did not need to consider). As stated by Robert Walker LJ in Yaxley (recognising that s.2(5) of the 1989 Act saved the operation of constructive trusts),

`[the subsection] would allow a limited exception, expressly contemplated by Parliament, for those cases in which a supposed bargain has been so fully performed by one side, and the general circumstances of the matter are such, that it would be inequitable to disregard the claimant’s expectations ..`.

For the doctrine of mutual wills to apply there has to be a clear agreement13. Once a definite agreement is established, then if such agreement is deprived of effect solely by the operation of the 1989 Act, it is submitted that a constructive trust extending to the common property of both testators ought to be imposed in appropriate circumstances.

 

1 Re Dale [1994] Ch 31
2 Re Goodchild [1997] 1 WLR 1216 C.A.
3 Dufour v Pereira (1769) 1 Dick 419 per Lord Camden LC
4 (2002) 19 EG 147 and [2002] WTLR 849
5 Re Goodchild [1997] 1 WLR 1216 C.A. affirming the decision of Carnwath J (reported at [1996] 1 WLR 694) that there had to be evidence of a clear agreement
6 Re Wilford’s Estate (1879) 11 Ch.D 267
7 [1997] 1 WLR 1216
8 (1937) 57 CLR 666
9 Horton v Jones (1935) 53 CLR 475
10 [1998] 1 FLR 806
11 recognised in Yaxley v Gotts [2000] Ch 162
12 Lloyds Bank v Rosset [1991] AC 107
13 Birch v Curtis [2002] WTLR965

Edward Bragiel
Barrister
Hogarth Chambers
Lincoln’s Inn