Ipsofactoj.com: International Cases [2001] Part 1 Case 13 [NZCA]


COURT OF APPEAL, NEW ZEALAND

Coram

Lewis

- vs -

Cotton

RICHARDSON P

BLANCHARD J

TIPPING J

18 DECEMBER 2000


Judgment

Blanchard J

(delivering judgment of the court)

INTRODUCTION

  1. This appeal concerns the will of Lloyd Cotton who died on 15 May 1997. His wife, Dawn Cotton, had died some 10 years earlier, on 10 September 1987. Their three children are Susan Tomich, born in 1957, Graeme Cotton, born in 1959, and the appellant, Gae Lewis, born in 1961. The executors and trustees of Lloyd Cotton’s will are his son Graeme and his solicitor, Mr. Bruce McGregor of Thorne Dallas & Partners, Whangarei.

  2. On 22 June 1983 Lloyd and Dawn Cotton had executed wills prepared for them by Mr. McGregor. Dawn Cotton’s will proved to be her last will when she died suddenly some four years later. After her death Lloyd Cotton made subsequent wills culminating in his last will of 5 August 1994.

  3. There are three issues on the appeal:

    1. Whether the wills of 22 June 1983 were made in circumstances whereby they were "mutual wills" and Lloyd had bound himself not to change his will after his wife’s death. If so, it is said that the executors and trustees hold the assets of his estate upon a constructive trust to implement the trusts of Lloyd’s 1983 will.

    2. If that claim fails, as it did in the High Court, whether Gae Lewis is entitled to further provision out of her father’s estate under the Family Protection Act 1955. She and her husband have net assets of more than $1m. Under her father’s last will she received forgiveness of a debt of $100,000, a one-third interest (worth $93,000) in a beach house property and one third of the small residue. The High Court Judge, Anderson J, refused her application under the Family Protection Act upon the authority of this Court’s recent decision in Williams v Aucutt [2000] 2 NZLR 479 which was delivered a few days after the conclusion of the High Court hearing in the present case.

    3. Whether Anderson J erred in the quantum of his cost orders against Gae Lewis in favour of her brother and sister and the estate.

    THE BACKGROUND TO THE 1983 WILLS

  4. In 1949 when Lloyd Cotton was about 25 he bought a farm at Mangapai in Northland which became known as the Caves Rd farm. He married Dawn in April 1956. She was about 10 years younger than him.

  5. Another nearby farm known as the Thompson Block was acquired in 1972 and in 1977 a farming block adjoining the Caves Rd property was purchased. All of these properties became vested in a company, Cotton Farms Ltd, which had been incorporated in 1969. It had 300 shares divided into 75 A shares with nine votes per share and 225 B shares with one vote per share. Lloyd held the 75 A shares and thus controlled the company. Dawn held 75 B shares and 150 B shares were held by a family trust established by Dawn of which she and her brother, Alan Rapson, were the trustees. Mr. Rapson died in about 1982. Dawn was thereafter the sole trustee.

  6. The family trust was to terminate when the youngest of the three Cotton children attained 25 but before that event would arrive the trustees had power to distribute all or part of the trust’s assets on a discretionary basis. If they did not exercise this power the assets would vest equally in the three children upon Gae’s 25th birthday in 1986.

  7. Graeme began working on the farm when he left school, full-time from 1976. It had always been Lloyd and Dawn’s intention that if Graeme showed enthusiasm and aptitude for farming, he would be placed in a privileged position in relation to the farming assets. Gae herself said in an affidavit that it was always her parents’ intention that if Graeme wanted to farm the Caves Rd property he would have the opportunity to do so. He did show aptitude and dedication. He played a considerable and increasing role in developing the family properties.

  8. When Graeme was born Lloyd had made his first will. Over the succeeding years he revised it on a number of occasions, doing so for the first time in 1971. The two earliest wills, after providing for his wife, left his estate equally between his children. In 1980 Lloyd made his third will. He was then 58. Dawn at the same time made her first will. Lloyd’s 1980 will provided for a legacy to Dawn and for the residue to be held for her benefit until her death or remarriage with remainder equally to the three children. Graeme was given an option to purchase the shares in the farming company upon favourable terms. Dawn’s 1980 will essentially mirrored that of her husband. At the same time as these wills were made 75 of the trust’s B shares were transferred to Graeme who had turned 20.

    THE 1983 WILLS

  9. The 1983 wills appear to have been executed as part of a response to a letter from Mr. McGregor pointing out that unless Dawn as sole trustee took steps to vest the trust’s remaining 75 B shares in Graeme before Gae turned 25 in 1986, there would be an equal distribution of those shares to the children.

  10. Lloyd’s 1983 will provided for Dawn to receive the income of his estate during her lifetime. He left to his daughter Susan a beach house at One Tree Point, Ruakaka which he had acquired in his own name from his mother in 1973. Lloyd also bequeathed Susan a legacy of $25,000.

  11. Lloyd directed his trustees to hold his A shares in Cotton Farms Ltd and to use the voting power of those shares to cause the company to give Gae the option of purchasing the Thompson Block from the company together with all the beef stock depastured on that block. The option was so framed that Gae would be able to acquire the Thompson Block on payment of $25,000 only. If she did not exercise her option she was to receive a sum equivalent to the value of the Thompson Block (including the stock) less $25,000. A comparable provision was to apply if the Thompson block had already been sold before Lloyd’s death.

  12. The rest of Lloyd’s estate was left to Graeme.

  13. Dawn’s 1983 will provided for a life interest for Lloyd and, subject thereto, left her estate to Graeme.

  14. The day after the 1983 wills were executed Dawn, as sole trustee, transferred to Graeme the trust’s remaining 75 B shares in Cotton Farms Ltd.

    EVENTS AFTER DAWN'S DEATH

  15. Following Dawn’s death in 1987 the 75 B shares in the company which she had personally owned were transferred to Graeme pursuant to her 1983 will.

  16. In the same year the company purchased a further block of land from the Horn estate. This purchase was followed by the acquisition of yet more blocks from various vendors in 1990, 1991, and 1992.

  17. Three months after Dawn’s death, Lloyd made a fifth will on 7 December 1987. In it he bequeathed certain moneys to his daughters equally. He also left the One Tree Point property to them, expressing the desire that Gae should sell her half share to Susan. He left all his shares in Cotton Farms to Graeme but subject to his trustees using their voting power, prior to transferring the A shares, to cause Cotton Farms to transfer the Thompson Block to Graeme, Gae and Susan as tenants in common in equal shares. Under the 1987 will the residue of Lloyd’s estate was to go to the three children equally. He expressed the desire that Graeme should be given the opportunity to purchase the interests of his sisters in the Thompson Block.

  18. In 1988 Cotton Farms was re-capitalised but Lloyd continued to hold the A shares and thus continued to exercise control over the company.

  19. Lloyd made a further will on 4 September 1992 which left his Cotton Farms A shares to Graeme and the beach house to Susan Tomich. He forgave any money owing by Gae. He left the residue of his estate equally between his children.

    LLOYD'S LAST WILL

  20. Lloyd’s last will was made on 5 August 1994. He appointed Graeme and Mr. McGregor as executors and trustees. He declared his intention of enabling his daughter Susan to obtain the Thompson Block "as if it were a bequest to her without payment". It was of course owned by Cotton Farms Ltd. To that end he gave his shares in Cotton Farms to his trustees to be held upon trust and directed them to exercise the voting rights to cause the Thompson Block to be transferred to Susan for the minimum value approved by the Inland Revenue Department (so that gift duty would not be incurred). He directed the trustees to hold the A shares for Graeme but charged that bequest with payment to the estate of a sum equal to that payable by Susan to the company for the Thompson Block. His will then gave Susan a sum equal to that amount.

  21. Under the last will Lloyd devised the One Tree Point beach house to the three children as tenants in common in equal shares and forgave to Gae a sum of $100,000 owing by her, recording that it was intended to have been a gift but had been "recorded as a loan for legal purposes". The boat was given to Graeme. The residue of the estate was divided equally between the three children.

  22. At the time of Lloyd’s death his assets consisted of the A shares, the beach house (worth about $280,000), a boat ($35,000), listed shares ($10,500), a bank account ($8,435), and the debt owing by Gae of $100,000. Cotton Farms Ltd owned 319.57 hectares at Caves Rd and the 68.8851 hectares of the Thompson Block. The company had 408 dairy cows, 114 beef cattle and 186 deer.

    GAE'S FINANCIAL POSITION

  23. Gae married Neil Lewis in 1983. Both were interested in farming. At that time they had little in the way of assets. Until 1989 they were sharemilking. They purchased a farm in that year with the assistance of a $100,000 loan from Cotton Farms. That loan was subsequently transferred from the company to Lloyd and was forgiven by his last will. In the early 1990s Gae and Neil were involved in two profitable ventures and in 1994 acquired a property from Neil’s mother on which they have built what the Judge in the High Court described as a substantial dwelling. It was constructed with timber supplied by Cotton Farms.

  24. There was a dispute between the parties about the exact financial position of Gae and Neil Lewis. They have substantial debts (some being to relatives on an interest free basis) but it was said that part of their present wealth has been achieved by a policy of borrowing money in order to acquire land. Anderson J found that they now have net assets of substantially more than $1 m. Their marriage appears to be stable. The net asset and marital position of Gae Lewis is therefore very similar to that of the claimant in Williams v Aucutt.

    SUSAN'S POSITION AND ATTITUDE

  25. In 1997 when Lloyd died Susan and her husband, a Fletchers executive, had a net worth of about $500,000. They live in Auckland. In practical terms Susan is not affected by her sister’s claim. Graeme will ensure that she receives the benefit intended by her father under the will in relation to the Thompson Block. Susan has not sought to disturb the will and has expressed concern that her sister seeks to do so.

    THE HIGH COURT JUDGMENT

  26. Anderson J concluded that the net value of the estate assets, including the $100,000 debt from Gae, was about $400,000 plus the contentious value of the A shares. The position was complicated because very soon after Lloyd’s death Cotton Farms Ltd was re-registered under the Companies Re-registration Act 1993 and a constitution adopted which did not provide for special voting rights for the estate’s shares. There was an issue between Gae and the trustees concerning whether they should have preserved the voting rights. In the view that we take it is no longer necessary to pursue that question. It suffices to record the Judge’s observation that the A shares may have had a value in the hands of the trustees of about $500,000, the amount he considered that Graeme might be prepared to pay. Looking at the reality, however, Anderson J said that the bequest to Graeme was worth at least $750,000 to him. The Judge noted that it was, moreover, a bequest which left him with total ownership and control of an asset worth $2.5 m acquired from his parents during his adult lifetime. "Of course he worked hard on the farm and must have contributed greatly to the company’s prosperity, but even so his parents had given him a fortune". The Judge expressed the view that it was the realisation of that position, together with disappointment on learning from a reading of the 1983 wills after her father’s death that she might have got the Thompson Block, which has driven Gae’s case rather than any demonstrable need for maintenance and support in terms of the Family Protection Act.

  27. The Judge concluded that

    when the wills were signed in 1983 Lloyd and Dawn had obviously come to an arrangement with each other as to the provisions of their wills. They intended that their wills should provide for their shareholdings in Cotton Farms Ltd to go to Graeme so that he would acquire the lands and the farming business, but that the daughters would also have the opportunity of acquiring land. 1983 was the year Gae married Neil and her interest in and aptitude for farming would have been apparent throughout her upbringing. Susan’s interest in farming does not seem as dominant. The provision for Gae to obtain the Thompson Road farm and the provision for Susan in respect of the beach house reflects that different emphasis.

  28. However, the Judge said, the essence of the mutual wills doctrine is not only mutuality but also irrevocability. He referred to the recent decision of the English Court of Appeal in Re Goodchild (deceased); Goodchild v Goodchild [1997] 3 All ER 63 for the proposition that in order for the doctrine of mutual wills to apply there must be a legally binding obligation on the part of each will maker never to alter or revoke his or will. The Judge said that the doctrine was best viewed in terms of equitable relief for breach of an agreement which the common law was inadequate to remedy because of its limitations of privity in respect of an intended and disappointed beneficiary who was not a party to the arrangement. The non-party could not enforce a contract against a deceased’s estate but could enforce a trust in his or her favour impressed on that estate. "The constructive trust was an equitable expedient for relief when one party to an agreement for irrevocability had honoured the agreement by not revoking and the survivor had not".

  29. The Judge said that Lloyd and Dawn knew that wills could be revoked because each had made at least one previous will. Mr. McGregor had been their advisor for estate planning purposes for a considerable time but it was plain to the Judge that they did not instruct him that the wills were never to be revoked. Nor did they seek advice from him as to how such irrevocability might be achieved. Mr. McGregor had said in evidence that far from their saying anything to indicate that they wanted their wills to be permanent, he understood that Lloyd and Dawn intended periodically to review their affairs to reflect an increasing entitlement on the part of Graeme to share in the ownership of the farm. When Lloyd had made his later will in 1987 nothing had been triggered in Mr. McGregor’s mind that Lloyd ought not to be making a fresh will. The Judge accepted that evidence.

  30. Anderson J said that it was inconsistent with the nature of the family relations that Dawn and Lloyd would have regarded their understanding at the time they made their wills in 1983 as being legally binding for the future, come what may. If Gae were right in her mutual wills claim, her father must have been acting in a deliberately dishonest way in respect of his recently deceased wife when he made his fifth will on 7 December 1987. The Judge said it would have been completely out of character for Lloyd deliberately to breach a testamentary agreement with Dawn which he had understood to be binding. In the Judge’s view he had not done so.

  31. Responding to a submission that they had regarded their property as joint or family property which they intended to leave to the substantial benefit of each member of the entire family, Anderson J accepted that "in a sense Dawn and Lloyd must generally have regarded their assets as matrimonial property but they were also conscious of legal differences in the holding of it, as the allocation of shares between Dawn and Lloyd, in the establishment of a trust, exemplified". All the Judge was prepared to infer was an underlying assumption that they would provide for their children:

    At the time of the wills and until appropriate new wills might be made in the light of the circumstances, the provision would be as the wills described. This is the assumption which probably underlies all wills made by married couples at the same time after discussing their testamentary plans. It is not a tenable proposition that in so doing they intended irrevocability…In a case such as the present, where the parties are sensible and mature adults with appreciable life expectancy, developing family circumstances, continuing accessibility to and periodic access to legal advice, more would be needed to compel the inference of agreed irrevocability than the plaintiff can point to here. The plaintiff’s case must be regarded as founded on disappointment that the 1983 will was not maintained rather than on an adequately evidenced inference that it would not be revoked.

    The Judge therefore rejected the claim based on mutual wills.

  32. He also rejected the Family Protection Act claim, applying the principles stated in Williams v Aucutt. He said that at the time of Lloyd’s death the net assets of Gae and her husband were $1.28 m:

    This comprised a rural home property of eight hectares with a modern house of gracious proportions; an adjoining property subject to a life interest to an elderly uncle; a substantial farm property; livestock, plant and motor vehicles; all of which had a gross value of a little over $2 million. Mr. and Mrs. Lewis were subject to liabilities of almost $750,000, but there is no suggestion that they have to sacrifice a comfortable and fulfilling lifestyle to service those liabilities. The Lewis family is in good health. The plaintiff’s circumstances could not support a claim for further provision on the basis of need for maintenance and accordingly the question is whether the claim can be supported on the basis of proper support in the form of recognition, both of membership of the family of the deceased and of contributions by way of assistance to and support of the deceased, if any, as was the case in respect of Mrs. Aucutt.

  33. The Judge referred to the assistance given by her father to Gae and her husband which he said had materially contributed to their present wealth. Having regard to the size of the estate, which he put at about $900,000, though it would realise much less on a sale, to the fact that the Thompson Block is not an estate asset, to the personal and financial circumstances of Gae and to the provision actually made during the testator’s lifetime and by will to her, the Judge could not accept that the testator had failed to make proper provision for Gae’s maintenance and support. Evidently treating the $100,000 loan as though it had already been gifted, he said that the one-third share in the beach house, valued at $93,000, together with an equal share in the residuary estate, if any, in terms of the will, was "far from merely nominal recognition of the plaintiff". Gae had been adequately recognised as a family member.

    MUTUAL WILLS

    ARGUMENT FOR APPELLANT

  34. In the High Court counsel for the appellant had accepted her need to prove an agreement by Lloyd and Dawn (a) that during their joint lives neither would revoke his or her 1983 will unless that were done openly and (b) that if there were no such revocation, the survivor would not afterwards revoke. This was the way in which the legal argument was advanced in written submissions in this Court. But in oral argument Mr. Judd QC, who did not appear below, relied heavily upon an Australian monograph, Mutual Wills, by Associate Professor Julie Cassidy which has been published earlier this year and came to hand only a few days before the hearing. It is part of the author’s thesis that something less than a formal contract between testators is required; that the essence of the doctrine of mutual wills is simply, to quote Nourse J In re Cleaver; Cleaver v Insley [1981] 1 WLR 939, 947,

    that a Court of equity will not permit a person to whom property is transferred .... 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 inconsistently with that agreement or understanding.

    The author comments that the obligation not to deal with property contrary to the agreement or understanding is the crux; not whether the second testator could revoke his or her mutual will.

  35. It was submitted that in looking for an agreement between Lloyd and Dawn that the wills would never be revoked the Judge had misdirected himself as to the law. This had caused him to mis-appraise the evidence. He should have recognised that it was the legal consequence of the arrangement made by the two testators that, unless there was an open revocation before one of them died, the other would not afterwards make any change. Lloyd and Dawn had not intended immutability until after the death of one of them. Equity would regard what Lloyd had done after Dawn’s will became irrevocable upon her death as a fraud upon her and upon the party she was trying to benefit.

  36. Counsel said that it was quite plain that her parents had agreed that Gae would receive the Thompson Block. The intention apparent in the 1983 wills themselves and the steps taken in relation to the B shares of the family trust was said to be shown also in evidence given by Neil Lewis of a conversation with Lloyd and Dawn in, it seems, 1985 when they were living on the Thompson Block but getting ready to go sharemilking elsewhere. In Lloyd’s presence Dawn had told him that they "would not be left out"; that Graeme was not going to get the beach property or the Thompson Block.

  37. Mr. Judd also referred to evidence from Mr. Lewis that a few days after Dawn’s death Graeme had told him that he (Graeme) had got Dawn’s shares. But he had not got the Thompson Block and was quite angry about this. Neil said that Graeme thought this was not fair as he had worked on the Thompson Block and therefore it should go to him. Mr. Judd pointed out that there had been no cross-examination of Neil concerning his evidence about either of these conversations.

  38. Counsel for the appellant submitted that the 1983 wills were a culmination of estate planning processes begun in 1969. Subject to showing the requisite commitment, Graeme was to get the Caves Rd property, but the daughters would also get substantial benefits. The complementary wills in 1983 were intended to implement an arrangement between Lloyd and Dawn, as the Judge had found. There was an immediate implementation by the transfer of the trust’s shares to Graeme, so that they would not vest in the three children. In transferring them Dawn foreclosed her ability to see her daughters participate in that parcel of shares. Counsel said that it must be taken that the parents had done a deal by which Lloyd agreed that under his will the Thompson Block and the beef cattle on it would go to Gae and the beach house plus $25,000 to Susan. This was to be the ultimate position in the estate planning, "come what may".

  39. Mr. Judd pointed also to evidence of the closeness of the mother / daughter relationship. It was, he said, inconceivable that Dawn would not have wanted to ensure that Gae got part of the farming property.

    DISCUSSION AND CONCLUSIONS

  40. The doctrine of mutual wills is closely analogous in its operation to the concept of the secret trust in which, for example, A leaves property to B upon an undertaking that B, although no trust is mentioned in the will, is to hold it for C or is to leave it for C under B’s will (see, for example, Ottoway v Norman [1972] 1 Ch 698). B then cannot take the property and repudiate the obligation to C. If B’s will in fact leaves the property elsewhere, B’s trustees must hold the property for C. Equity will not permit B to commit a fraud on A and on C by allowing B to deal with the property contrary to the undertaking.

  41. The origin of the doctrine was in cases of joint wills (e.g. Dufour v Pereira (1769) Dickens 418; 21 ER 332 and Denyssen v Mostert (1872) LR 4 PC 236). Such a document, signed by two testators, is read as separate wills (Denyssen at 254). For most purposes it makes very little difference whether or not there are separate documents although a joint will would at the present day be such a rarity that its existence might point strongly towards a mutual intention that neither should revoke.

  42. While there is still some uncertainty about the legal theory underlying the doctrine, some points are tolerably clear. A will-maker can always revoke his or her will even if non-revocation has been contractually promised, for a will is by its very nature and in its very essence a revocable instrument (Vynior’s Case (1610) 8 Rep 82a; In the Estate of Heys; Walker v Gaskell [1914] P. 192, 197). But the consequence of the promise may be that the executors and trustees of any replacement will, if it becomes operative upon the death of the testator, will be required to hold the affected assets upon a constructive trust in terms of the revoked will. In Birmingham v Renfrew (1936) 57 CLR 666 it was said by Dixon J that it is the trust arising from the course of conduct which is enforced, not the contract itself. In Re Dale, Decd; Proctor v Dale [1994] Ch 31, 41 Morritt J quoted the remark of Lord Camden LC in Dufour v Pereira that "a man may so bind his assets by agreement, that his will shall be a trustee for the performance of his agreement".

  43. Where "mutual wills" have been made the promise may be said to be either (a) not to revoke at any time whether secretly or openly (Bigg v Queensland Trustees Limited [1990] 2 Qd R11; Re Newey (Deceased) [1994] 2 NZLR 590, 593) or (b), more normally, not to revoke secretly during the other will-maker’s lifetime, thus depriving the other person of the ability to adjust his or her own will, and, secondly, not to revoke at all after the other’s death, which event of course makes the other’s promise truly irrevocable. Although there tends in the cases to be a concentration on non-revocation, Associate Professor Cassidy points out (at p 34) that the obligation not to deal with property contrary to the agreement or understanding is the crux.

  44. The express or implied promise may be held to be in form (a) if an open revocation would disadvantage the other will-maker — where merely changing the other’s will would not return that person to the status quo ante before the mutual wills were made, as, for example, where property has been transferred in reliance upon the arrangement (Re Dale). But in most cases the only loss following an open revocation by one will-maker (to the knowledge of the other) will be, as AJ Oakley Constructive Trusts (3rd ed 1997) p 267 puts it,

    .... the loss of the right to receive an unascertained amount at an unascertained time in the future and since the other party still has unrestricted powers to dispose of his own property, it is relatively unlikely that any substantial damages could be recovered

    ....

    Thus, while it is clear that revocation of the mutual will during the joint lives of the parties will determine the agreement and release the other party from his obligations under it, no effective remedy is likely to result to either party.

  45. It would seem that for equitable enforcement consideration in the strict sense is unnecessary. It would in any event, if necessary, be provided by the mutual promises and the execution of the wills. It has been said that consideration continues to be given by each party while both wills remain unrevoked (Re Dale). In Birmingham, however, it was said to be the death of one of the parties leaving his will in the agreed form which constituted the consideration. If that analysis is correct, there would presumably have been no earlier consideration because each will was revocable until one died. In this sense the death executed the contract between the parties.

  46. A promise not to revoke (or not to deal with property in an inconsistent manner) may be express or may be implicit from what the parties have said and done, including of course the terms of the two wills. However, there must be more than mere consultation and coordination between the testators and more than a mere agreement or arrangement between them that they will proceed to make their respective wills in a particular way. Such an agreement does not restrain the right to revoke (Gray v Perpetual Trustee Co. Ltd [1928] AC 391, 400). What is required to bring into play the doctrine of mutual wills is proof of an agreement intended to bind the two testators to a future course of inaction — that the wills shall remain unaltered, as Mr. Judd said in this case, "come what may", or at least in agreed circumstances. In Gray (at p400) the Privy Council said that

    .... the mere fact of making wills mutually is not .... evidence of such an agreement having been come to. And without such a definite agreement there can no more be a trust in equity than a right to damages at law.

  47. In Birmingham at p 674-5 Latham CJ commented:

    Perhaps most husbands and wives make wills "by agreement", but they do not bind themselves not to revoke their wills. They do not intend to undertake or impose any kind of binding obligation. The mere fact that two persons make what may be called corresponding wills in the sense that the existence of each will is naturally explained by the existence of the other will is not sufficient to establish a binding agreement not to revoke wills so made.

    See also Evatt J at p 692

  48. Any such commitment is unlikely and undesirable in modern times, which explains why true "mutual wills" are now so very infrequently found. Indeed, they have never been at all common. There are preferable ways of achieving the intended result without the unfortunate inflexibility which might, if found to exist, fail to allow for significant changes in circumstances, including the impost of changes to duties and taxes.

  49. As a result, the Courts are very slow to find "mutual wills" just because the parties have made corresponding wills. We agree with Anderson J’s view about the assumption normally underlying the wills of married couples in this country (see para [31] above). For a particularly hard case of rejection by a Court of the notion that corresponding wills indicate an agreement or arrangement that the survivor will not revoke see In re Oldham; Hadwen v Myles [1925] 1 Ch 75.

  50. The standard of proof for a party asserting the existence of mutual wills is the ordinary civil standard of proof on the balance of probabilities, but the claim must be scrutinised with very great care, as with all claims to the property of deceased persons (In Re Cleaver; Re Newey).

  51. Where the survivor is given the use of property under the mutual will of what in some early cases is quaintly called the first dier, it may be implicit that the survivor, though bound to bequeath the property in terms of the mutual will, may be taken to have agreed only to pass on what he or she has not sold, expended or consumed, provided that he or she does not act so as deliberately to defeat the purposes of the arrangement. This has been described in Birmingham by Dixon J as a "floating obligation" which crystallises on the death of the survivor.

  52. It would seem to be a matter of little practical consequence in most instances whether one says that what is required is an agreement or an arrangement or an understanding. Some leading cases, including the decision of the Privy Council in Gray, that of the High Court of Australia in Birmingham and the recent decision of the English Court of Appeal in Re Goodchild (deceased); Goodchild v Goodchild [1997] 3 All ER 63, say that there has to be a contract. A formal legal contract is not needed. A contract made without formality is enough. In re Cleaver speaks of a "contract or clear understanding" and Dixon J in Birmingham (at p 683) quotes with approval a passage from Hargraves’s Juridical Arguments and Collections (1799) which speaks of "mutual engagement". It could hardly be less than this. The crucial factor must be that the terms of the mutual engagement, however it was reached, are sufficiently certain that the court can see its way to enforce them (In re Oldham at p 86).

  53. Even on the basis that all the appellant has to show is an arrangement between Lloyd and Dawn in which it was implicit that neither would revoke the 1983 wills after the death of one of them, or from which that consequence flowed as a matter of law, an examination of the evidence satisfies us that she is unable to sustain her mutual wills claim. We do not consider that the way in which Anderson J approached that claim caused him to look at it in an inappropriate way. He appears to have been alive to the real issue — whether Lloyd had by his conduct bound himself not to change his will after Dawn’s death so as to reduce the inheritance of their daughters.

  54. The Judge found very little in the evidence to support this assertion. Nor do we. The pattern of will-making prior to 1983 and the settled intention that the farming assets should be passed on to Graeme was typical of many farming families. So was the intention that female children should receive some significant but relatively smaller benefit. The 1983 wills themselves and the accompanying transfer of the trust’s remaining shares were certainly the product of an agreement or understanding between the two will-makers. The arrangements were sensible in light of the family situation in 1983. Graeme was still destined to take the bulk of the farm but the daughters were to benefit substantially. Gae, with her new husband, Neil, was engaged in farming and was to receive the Thompson Block. She and Neil at that time had scarcely begun to acquire their present substantial assets. Obviously they were to be helped. So was Susan who was in a similar position.

  55. But it does not follow from the provision, by agreement or arrangement, of these sensible dispositions in 1983 that the parents were committing themselves to the irrevocability of the will of the survivor. The wills themselves contained no such indication. It would not readily have occurred to someone reading them in 1983 and informed about the background circumstances that such irrevocability was intended. There was no discussion to this effect with the solicitor, Mr. McGregor, which would very likely have occurred if Lloyd and Dawn had really been thinking of setting things in concrete, come what may, particularly if, as part of this arrangement, Dawn was to transfer the trust’s shares to Graeme. The absence of any such discussion is therefore a strong indication that irrevocability after the death of one of them was not in contemplation. The conversations with Neil Lewis cannot be taken to reflect anything more than, respectively, Lloyd and Dawn’s shared intention at the time when the first of those conversations occurred and Graeme’s understanding at the time of the second conversation of what hiss parents’ intention had been.

  56. Lloyd and Dawn were unlikely to have been oblivious to the possibility, indeed in modern times for a family of this kind almost the inevitability, of significant changes in circumstances during the lifetime of a survivor if one of them were to die prematurely. They would surely not have overlooked the possibility of changes in the financial position of their children and alterations to the relevant income tax and estate and gift duties regimes. A moment’s thought would have suggested to them that inflexibility was undesirable.

  57. In New Zealand conditions, where "mutual wills" are very rare, much more than such slender evidence needs to be established in order to prove, on the balance of probabilities, an agreement or clear understanding that the survivor will leave his or her will unaltered. In our view the appellant does not even come close to doing so. Her claim is based upon speculation after she learned of the existence of the 1983 wills, not upon any reasonable inference from the proven circumstances.

    THE FAMILY PROTECTION ACT CLAIM

  58. Counsel for Gae submits that although she and Neil have substantial assets, they also have a burden of debt, the servicing of which reduces their expendable income. That does not overcome the appellant’s fundamental problem that she has not been able to show any need for maintenance. Like the claimant in Williams v Aucutt, she is comfortably placed financially. On her own figures, she and Neil have a net worth of more than $1 m, actually exceeding that of Mr. and Mrs. Aucutt which was said to be "close to $1 million".

  59. Nor has it been demonstrated that the Lewis family income is inadequate. There is nothing suggesting that the Lewis’s are unable to maintain what appears to be a very pleasant lifestyle with a modern family home of some 400m². It is said on their behalf that the home is not yet completely finished, although the particulars given do not suggest a need for very substantial further expenditure. It is also said that Neil Lewis is hampered to an extent by an old injury and has to employ a contract worker. But the fact remains that the Lewis’s are not short of money and are able to maintain themselves and their children in a comfortable lifestyle.

  60. Gae has also failed to demonstrate any need for further "support", in the sense of a recognition of her membership of the Cotton Family and of having been important to the life of her father. She received significant support from him during his lifetime by means of the $100,000 "loan", which was never intended to be repaid, of which she has had the benefit for many years and which was duly forgiven by Lloyd’s will.

  61. Gae also received almost $100,000 under the will in the form of an interest in the One Tree Point property and one-third of the residue. It has been suggested on her behalf that the interest in the beach house is not realisable but the impression we have from the evidence is that her siblings would be prepared to buy out her interest. If they declined to do so then, in the circumstances revealed by this case, it seems most unlikely that a Court would exercise its discretion against sale if an application were made by Gae under s 140 of the Property Law Act 1952 seeking partition or sale.

  62. Whilst Gae is understandably very disappointed at not being treated more generously by her father, she has not proved any breach of moral duty in terms of the Family Protection Act. The Court does not undertake the exercise of rewriting a will merely because it can be perceived as being unfair to a family member who is not actually in need of maintenance and support. Whilst Susan and Graeme, particularly the latter, have been much better treated, it is not for them, as a matter of law, to have to justify what they have been given by their father in circumstances where no breach of any moral duty to Gae has been shown.

    COSTS

  63. Gae Lewis also appeals against the costs awards made against her by Anderson J. In a judgment delivered on 10 November 2000 he ordered her to pay Graeme Cotton $51,505.14, Susan Tomich $10,544.25, the estate $14,345.81 and Ms Clapham, a barrister appointed on an ex parte application made by Gae to represent the Tomich children (an appointment subsequently revoked on the application of Susan Tomich), $871.35. Except for the award to Graeme, these were awards on an indemnity basis. All awards are challenged apart from that directed to Ms Clapham’s costs.

  64. Graeme Cotton’s actual expenses for the litigation totalled $68,353.10 which included legal fees of $39,333.63. The Judge rightly considered that, given the nature and complexity of the litigation and his counsel’s seniority and experience, these charges were extremely reasonable. Susan Tomich had sought an indemnity because she was an unwilling but necessary party to her sister’s unsuccessful litigation. She was put to what she said were considerable costs in moving successfully to have set aside the order for separate representation of her children of which she had not been given any prior notice. The estate has cash of only about $18,000, which is the amount of the residue. The estate costs and expenses were $16,370.81. The Judge considered that a part of this related to probate and administration costs which should fall on Graeme. Subject to that, he could not see any reason why Susan and Graeme should have their inheritances diminished by the costs to which they had been put by Gae’s unsubstantiated claims. He noted that between the beginning of the hearing, which lasted six days, and the delivery of judgment Graeme had twice offered to settle by paying Gae $100,000 more than she receives under the will. The Judge described that as a sensible offer which Gae found unacceptable.

  65. Counsel for Gae accepted that this was an appeal against the Judge’s exercise of discretion. He had to accept also that this Court is very slow to upset costs awards in the High Court. Pointing to the new r 48C(4) of the High Court Rules, Mr. Judd, in a written submission, said that indemnity costs apply only where a party has acted vexatiously, frivolously, improperly or unnecessarily in commencing, continuing or defending a proceeding or a step in the proceeding or has ignored or disobeyed an order or direction or breached an undertaking. Gae’s proceeding did not, it was said, come within any of these categories.

  66. Mr. Judd also said that the proceeding was brought reluctantly by his client and that the first offer of settlement by Graeme was not made until three days of hearing had occurred, by which time all preparation, including briefing of witnesses, had been done.

  67. We are not persuaded that the Judge’s approach was contrary to principle or plainly wrong. On the evidence put forward on her behalf, the mutual wills allegation bordered on the hopeless. It might be said that the family protection claim had some prospects when it was brought, notwithstanding Gae’s comfortable financial position, since Williams v Aucutt was decided in this Court only after the hearing in the present case and, it might be argued, this Court took a less welcoming attitude to such claimants than perhaps some lower Court Judges had been doing. But, as Mr. Bell pointed out in his submissions to Anderson J on the question of costs, he had in his closing submissions, before the Williams judgment was delivered, referred the Judge to Re Shirley (CA155/85, 6 July 1987) upon which this Court placed some reliance in Williams.

  68. Furthermore, the appellant appears to have introduced into the litigation questions of farm valuations, requiring expert evidence, which it was largely unnecessary to pursue, certainly in great detail. There were other aspects of the way in which Gae’s case was presented in the High Court indicating a lack of focus on the essential ingredients of her claim. We refer, for example, to evidence of no apparent assistance about the affairs of the Rapson family.

  69. The award to Graeme was the amount which he sought but the fee content appears to have been only a little more than two-thirds of the fees actually incurred. In view of the foregoing criticisms of the content and style of the appellant’s case in the High Court, this award ought not to be disturbed.

  70. It is said for Gae that Lloyd appeared in his last will to have made inadequate provision for her and that he and his estate "took the risk" of a proceeding being brought. But it is now established that the provision was in law adequate. The comment cuts both ways. The fees charged to the trustees of Lloyd’s estate are relatively modest. There do not appear to have been any unnecessary attendances by counsel representing the trustees. In view of the modest extent of the residue the Judge could properly decide that Gae should pay costs to the estate on an indemnity basis.

  71. As far as Susan Tomich is concerned, once Gae had elected to pursue the mutual wills claim, Susan could not avoid being dragged into the proceeding as her inheritance appeared to be affected. It was entirely reasonable for her to seek the setting aside of the ex parte order concerning representation of her children. It is surprising that she was not given the courtesy of an opportunity to express her view before that order was sought.

  72. The Judge’s decision to require Gae to indemnify Susan was in the circumstances reasonably open to him.

    RESULT

  73. The appeal is dismissed with costs to Graeme Cotton of $5,000. The appellant is also to reimburse the respondents’ reasonable expenses of the appeal, including counsel’s travel and accommodation costs, to be fixed if necessary by the Registrar.


Cases

Williams v Aucutt [2000] 2 NZLR 479; Re Goodchild (deceased); Goodchild v Goodchild [1997] 3 All ER 63; In re Cleaver; Cleaver v Insley [1981] 1 WLR 939; Ottoway v Norman [1972] 1 Ch 698; Dufour v Pereira (1769) Dickens 418; 21 ER 332; Denyssen v Mostert (1872) LR 4 PC 236; Vynior’s Case (1610) 8 Rep 82a; In the Estate of Heys; Walker v Gaskell [1914] P. 192; Birmingham v Renfrew (1936) 57 CLR 666; Re Dale, Decd; Proctor v Dale [1994] Ch 31; Bigg v Queensland Trustees Limited [1990] 2 Qd R11; Re Newey (Deceased) [1994] 2 NZLR 590; Gray v Perpetual Trustee Co. Ltd [1928] AC 391; In re Oldham; Hadwen v Myles [1925] 1 Ch 75; Re Goodchild (deceased); Goodchild v Goodchild [1997] 3 All ER 63; Re Shirley (CA155/85, 6 July 1987)

Legislations

Family Protection Act 1955

Authors and other references

Associate Professor Julie Cassidy, Mutual Wills

Hargraves’s Juridical Arguments and Collections (1799) 

AJ Oakley Constructive Trusts (3rd ed 1997)

Representations

G J Judd QC and M J McCartney for Appellant (instructed by Lewis Callanan, Browns Bay).
R Bell for Respondents (instructed by Webb Ross Johnson, Whangarei).


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