The Nature of Mutual Wills

A significant problem will no doubt arise in the event that an owner wishes to leave property to his wife, for instance, subject to a requirement that the recipient surviving wife bequeaths it to an agreed third party, eg a son from a previous marriage or a beloved nephew. In the above scenario, if the husband executes a Will under which he leaves his property to his wife, the property will become her absolute property on the husband’s death and she will be free to execute her own Will under which she may leave the property to whoever she chooses, even to the children of a second marriage or to some charitable object.

One of the ways to avoid this obvious difficulty is to make a life time gift to their daughter or for both the husband and the wife to decide to execute Wills with the identical terms, thus leaving their properties to each other in the event that they predecease, but to their daughter if they survive. However, it is trite that a Will remains revocable during the testator’s lifetime. Even if the testator has contracted not to revoke his Will he may still do so, though the estate may be liable for his breach of contract. Thus, even where identical Wills have been executed, the survivor will remain free to revoke the former Will and leave the property to others.

No case better illustrates the practical difficulties in the light of the foregoing than the facts of Re Cleavers Case [1981] 2 All ER 1018, where Arthur and Flora Cleavers had married in 1967, when Arthur was 78 and Flora 74. Arthur had three children by a previous marriage and Flora none. They executed identical Wills leaving the bulk of their estates to the survivor absolutely, and in default of their survival to the three children. Arthur died in 1975. The Will was proved and Florence became entitled to his estate absolutely. She subsequently executed a new Will leaving the entire property, which included the property she had inherited from her husband, Arthur, to only one of the children. While Arthur had clearly intended that the property bequeathed to his wife should ultimately be left by her to the children equally, it was however, impossible to prevent his widow revoking her Will and executing a replacement with differing terms. If the terms of the new Will were allowed to operate, Arthur’s intentions would have been defeated by his wife’s subsequent change of mind. Arthur seemed to be a very determined man and everything suggested he would, so far as he could, have wanted to ensure that anything which was left at [his wifes’s] death should go back to his side of the family. These difficulties can be avoided by bequeathing property directly to the intended ultimate beneficiaries or as previously adumbrated through the use of a life interest which will ensure that the survivor is only entitled to utilise the income derived from the property but not the capital. But these may not be of any practical benefit where the testator does not possess great wealth. Thus, the most appropriate solution will be a mechanism which enables the survivor to enjoy the property inherited from the first to die if necessary but which prevents the survivor from making an effective bequest of any of the property remaining at the date of their death to anyone other than the agreed beneficiary.

Equity provides such a mechanism through the doctrine of "mutual Wills". Equity develops this doctrine to overcome the difficulties posed by the irrevocability of Wills. The doctrine of mutual wills is to the effect that where two individuals have agreed as to the disposal of their properties and have executed mutual Wills in pursuance of the agreement, on the death of the first [testator], the property of the survivor [testator no 2], 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 dies, his personal representatives will take the property subject to the trust. For authority for the above proposition, see the observation of Morrit J in Re Dale [1993] 4 All ER 129 at 132. Note further that where mutual wills have been executed equity does not prevent the survivor from changing his Will but the executors of the Will will imply the he holds any property which was intended to be left to the beneficiary of the mutual wills on constructive trust. By means of this constructive trust the property will be held for the beneficiary named in the original mutual Wills, and not pass to those named in the new Will. See the case of Gray v Perpetual Trustees CO Ltd [1925] AC 391 at 399 where the Privy Council stated that;

"If two persons simultaneously make Wills to the same effect, and in that sense mutually, a second Will made by one of them after succeeding to the other’s estate under the originally made Will is precluded from being treated as effective to interfere in equity with the existing disposition..."

Thus, in the light of this authority, the court held in Re Cleavers Case that the Wills executed by Arthur and his wife had been "mutual wills"; so that the equitable doctrine applied and a constructive trust had come into existence. The widow’s executors therefore held the property she had received under her husband’s Will on constructive trust for the three children in equal shares. Note that the rationale for the imposition of a constructive where the testators executed mutual wills is based on an agreement not to revoke. In essence, a constructive trust will be imposed if the testators executed mutual wills on the basis of an agreement not to revoke. The rationale for imposing a constructive trust in such circumstances is that equity will not permit the survivor to commit fraud by going back on his agreement. Since the property he received on the death of the first testator had only been bequeathed to him on the basis of the agreement not to revoke his Will, it would be a fraud for him to take the benefit whilst failing to observe the agreement and equity intervenes to prevent this fraud.

In the Australian case of Birmingham v Renfew [1936] 57 CLR 666, Dixon J stated the principle underlying mutual wills in the following terms;

"It has long been established that a contract between persons to make corresponding wills gives rise to equitable obligations when one acts on the faith of such an agreement and dies leaving his Will unrevoked so that the other takes property under its dispositions. It operates to impose upon the survivor an obligation regarded as specifically enforceable. It is true that he cannot be compelled to make and leave unrevoked a testamentary document and if he dies leaving a last Will containing provisions inconsistent with his agreement, it is nevertheless a valid 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 and testament".

In essence, the principle distilled from all the authorities on this subject 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 not to be dealt with inconsistently with that agreement or understanding. If he attempts to do so after having received the benefit of that gift, equity will intervene by imposing a constructive trust on the property which is the subject matter of the agreement or understanding. See Nourse J in Re Cleaver [1981] 2 All ER 1018 at 1024.

It is crystal clear that fraud seems to be the underlying justification for the imposition of a constructive trust in cases of this kind for where there is a contract between the testators which on the death of Testator no 1 is carried over into effect by him, there seems to be an equitable presumption that testator no 1 dies with the promise of Testator no 2 not to disregard the contract which became irrevocable on the death of Testator no 1. See Morrit J in Re Dale [1993] 4 All ER 129 at 136.

Mutual Wills operate to prevent the survivor acting fraudulently contrary to the agreement or understanding he reached with the other testator. The survivor in a mutual Will is entitled to inherit the estate of the predeceasing party absolutely or receive a life interest in it but he is not allowed to dissipate or squander the estate or transfer it to another party as intended by the testator in such a Mutual Will. Therein is the strategic benefit of a mutual Will in preserving or protecting family wealth or estate for the offspring of the family. That is why we always advise parties who want to ensure that upon their death that their property will be preserved for their children and loved ones by the surviving spouse given the concern that the surviving spouse may jump into another marriage and squander the wealth with his "new" partner. A man may use mutual Wills to ensure in the circumstances that even if he predeceases the wife and that the wife decides to remarry after his death, that his estate/wealth/property will still go to his children as the wife or her executors will be holding the property belonging to him in constructive trust for his original intended children under their mutual Wills.

Mutual Wills seem to operate as if it was a contract not to revoke a Will or make a new Will inconsistent with what the parties have agreed under their mutual Wills. Thus, the doctrine of mutual wills will only operate if the testators had agreed that their Wills would not be revoked and in the absence of an agreement there will be no fraud if the surviving testator revokes his Will.

Hence, Lord Loughborough LC in Lord Walpole v Lord Oxford [1797] seemed to encapsulate the core principle relating to the above when he tersely observed that "the principal difficulty in establishing that Wills were intended to be mutual is determining whether the testators had entered a legally binding obligation not to revoke their Will rather than a mere honourable agreement". Suffice it to say that the agreement or understanding not to revoke their Wills must be such as demonstrably and transparently imposes on the donee a legally binding obligation to deal with the property in the particular way.

Some authorities seem to suggest that this agreement between the parties must take the form of a valid contract. See for instance the observation of Morrit J in Re Dale [supra] to the effect that for the doctrine to apply there must be a contract at law. However, the correctness of this reasoning is doubted. We respectfully submit that a contract should not be required because it is not an essential element of the establishment of a constructive trust. See the case of Goodchild v Goodchild [1997] 3 All ER 63 where the argument was strongly canvassed albeit unsuccessfully. However, the Court of Appeal in the same case after rejecting the purported analogy between the operation of mutual Wills and secret trusts held that a contract was required. We would have thought that a mutual understanding and/or an agreement should suffice. We think that the decision of the Court of Appeal in the instant case borders on strict tabulated legalism to say the least!

A consistent line of authority requires that for the doctrine of mutual wills to apply there must be a contract between the two testators. Viscount Haldane in the Privy Council decision in the case of Gray v Perpetual Trustees Ltd [[1928] AC 391 at 400 made such requirement abundantly clear.

In light of recent authorities on this subject, it is crystal clear that a contract will be required.

Note that in the absence of a contract the testators’ wills will not be mutual and a constructive trust will not arise.

In Re Oldham [1925] Ch 75, Mr and Mrs Weldon executed similar wills in 1907. In 1914 the husband died. As a result his estate passed to his wife absolutely. In 1921 she married Mr Oldham, who was some 35 years some her junior, and altered her Will to grant him a life interest in a large portion of her estate. She died in 1922, leaving some £108,000, all but £10,000 of which had come from her first husband’s estate. Ashbury J held that there was no evidence of an agreement that the "mutual" wills should be irrevocable, and therefore there was no trust raised in favour of the beneficiaries named in them.

We will advise persons wanting to arrange their estates and affairs with mutual Wills to be fully aware that the effect of the existence of mutual Wills is to impose a binding legal obligation in respect of the property affected and that a constructive trust will be established if the mutual wills themselves contain a statement that they have been executed on the basis of an agreement. See Re Itagger [1930] 2 Ch 190. It should also be noted that the property rights of the beneficiaries of the mutual wills cannot crystallise until the date of death of the survivor. The nature of the entitlement of the beneficiaries of a constructive trust arising under mutual wills is rendered similar to a floating charge over the assets of a company which is based on the crystallisation of the charge upon the occurrence of a specified event in the instrument creating the charge/debenture. See Re Panama, New Zealand and Australian Royal Mail Co [1870] 5 Ch App 318. The trust like a company floating debenture/charge would, however, crystallise and settle on the assets of the survivor upon his or her death.

The doctrine of mutual wills clearly operates to prevent the survivor disposing of the trust property by will in a manner inconsistent with the mutual wills. Note that the survivor under mutual wills is prevented from disposing of the trust property during his lifetime. This does not mean that he cannot dispose of the property inter vivos [ie lifetime disposition]. But note that there must be limit to the powers of survivor to dispose of the property subject to the trust, otherwise the entire purpose of the arrangement could easily be defeated. Hence, it is in this regard that gifts and settlements, inter vivos (lifetime), if calculated to defeat the intention of the compact or agreement or contract between the testators, could not be made by the survivor and his right of disposition, inter vivos is, therefore, 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. See Dixon J in Birmingham v Renfrew (1936) 57 CLR 666.

Note that even during the lifetime of the survivor under mutual wills, he could be called upon to account for any extraordinary or anomalous transaction inappropriate to his means and circumstances. Such extraordinary and anomalous transaction could be set aside or held to have no effect. Besides, if any purported extraordinary or anomalous transaction was identified, a beneficiary affected by it could presumably take steps to restrain it.

Clement Chigbo [Esq], LLB [Hons], LLM [London], L.E.C, B.L, Dip.Lat, MCIarb, Solicitor of England and Wales, Member of the Chartered Institute of Arbitrators, UK, practises with the Law firm of CF Butler & Associates and is currently a doctoral candidate and tutor in Law at The University of Aberdeen, UK. Comments, suggestions and opinions are welcome. He may be contacted at lawscholar2006@yahoo.com, clemsweiss@hotmail.com