See also In re Goodchild [1997] 1 WLR 1216 at 1225-6; Birmingham at 674-5, 691-2.
13 Fourthly, there is nothing to indicate that the couple were significantly better off in 1986 than at the time of Derek's death. One might therefore infer that they always had in contemplation that the estate passing to the survivor (including the home unit) would not be a large one. Unlike some mutual will cases, this was not a case where one party is shown to have brought substantially more property into the marriage than the other. And there is nothing to exclude the possibility that the couple may have contemplated that the survivor might live for many years after the death of his or her spouse. For obvious reasons these factors make the appellants' case all the harder.
14 I have not overlooked the material relied upon by the appellants which consists of statements by Derek to his former wife and his son. These referred to the two wills and indicated Derek's belief that both sets of children would be provided for. As Giles JA points out, these statements reflect Derek's reasonable expectation at the time but they do not persuade me of the existence of a contractual arrangement to that effect.
15 This Court has no knowledge of the circumstances which led Gwendoline to make a new will in 1993. More importantly, it is not the business of the Court to concern itself with such matters unless they have any bearing upon the legal rights of the parties and nothing suggests that they do.
16 The wills were prepared by an officer of the Public Trustee. Had such officer been instructed to ensure that the survivor could not revoke the mutual will, then one would expect the matter to have been put beyond doubt by provision to that effect in the wills or in a contemporaneous memorandum (see Re Newey (Deceased) at 594-5). However, it must also be borne in mind that a solicitor instructed to prepare contractually binding mutual wills in the circumstances would be risking a negligence claim if he or she omitted to explain the impact of such a contract. The prudent solicitor would also have to ensure that the clients realised that a contract would impede the survivor from dealing with supervening contingencies such as remarriage, or the death or bankruptcy of one of the secondary beneficiaries.
17 It is hardly surprising that binding mutual wills are treated with considerable reserve by academic lawyers. Thus, Robert Burgess concluded his article "A Fresh Look at Mutual Wills" (1970) 34 Conv(NS) 230 at 246 with the following:
From a practical point of view, while submitting that the difficulties of mutual wills are not as insuperable as they seem at first sight, this must not be taken as advocating the wholesale adoption of mutual will by intending testators. While this device might be appropriate in the case of an elderly married couple wishing to settle their affairs in the same way before they die, in other circumstances the use of the mutual will can at best be inconvenient and at worst be little short of disastrous, especially in the case of a young married couple with long life expectancies. In these circumstances the present writer would avoid mutual wills like the plague.
18 Hanbury and Martin, Modern Equity 15th ed concludes the discussion about mutual wills in the following terms (at pp311-12):
For the present, persons who wish to leave property by way of mutual wills should be advised to consider most carefully the trusts on which they wish the property to be held; what property is to be included; the position during the survivor's lifetime; who they wish to be trustees; what administrative powers the trustees should have; and how best the scheme desired can be carried out from an inheritance tax point of view. Merely to draft mutual wills and then leave the law to sort out such a host of problems is no service to the testator. The law in this context, as in most other areas of constructive trusts, imposes a trust in an attempt to prevent one party from committing a fraud on the other. It is a kind of salvage operation; a salvage of a wreck which competent legal advice would have avoided in the first place.
19 In New South Wales the broad reaches of the "notional estate" provisions of the Family Provision Act 1982 will also bear upon the advice given by the competent solicitor to persons situated in the position of Mr and Mrs McDonnell. Suffice it to say that the Act has a dual impact. It may allow the trust otherwise stemming from a mutual will contract to be modified in its practical effect. Conversely, the judicial power to make proper provision in favour of a person who is in need at the time of the death of the survivor means that testators have the "comfort" of knowing that certain types of inappropriate testamentary conduct by the survivor can be put to nought. These possibilities reinforce my conclusion that a contract should not lightly be inferred in circumstances such as the present.
20 HANDLEY JA: Mr Derek McDonnell and Mrs Gwendoline McDonnell made mutual wills in reciprocal form on 12 March 1986. They had married on 13 May 1967, having both been married before and divorced. Both had children from their prior marriages but they had no children from their marriage to each other. In 1986 Mrs McDonnell was 68. Mr McDonnell was presumably older but his age was not proved.
21 Each will gave the maker's estate to the survivor, and in default half the estate went to the children of Mr McDonnell and the other half to the children of Mrs McDonnell. This was an eminently sensible and fair arrangement which ensured that the order in which the couple died did not affect the inheritance of the next generation on either side. This was not to be a case of survivor take all but an equal division independent of time and chance.
22 As it happened Mrs McDonnell was the survivor and if Mr McDonnell's age had been proved this may always have been the probable outcome. Mrs McDonnell had, at the very least, a strong moral obligation to respect the arrangement she had made with her husband, whether or not it was legally binding. Unfortunately her wish to maximise the inheritance of her own children, or their importunities, prevailed, and within 12 months of Mr McDonnell's death she had made a new will leaving her whole estate to her children. She died 3 years later without changing that will.
23 Mr McDonnell's children sued the executrix of Mrs McDonnell's will seeking to enforce a constructive trust arising from an alleged contract between Mr and Mrs McDonnell to make mutual wills and leave them unrevoked. Their case was dismissed by Master Macready and they have appealed to this Court. I wish that I could have found a proper legal basis for upholding their appeal.
24 In order to succeed the appellants had to establish that Mr and Mrs McDonnell made a contract. One may readily infer from the form of the wills, the history of their making and their simultaneous execution that Mr and Mrs McDonnell had agreed on the plan of distribution evidenced in their wills. However mere consensus is not enough. There is a legal presumption of some strength that informal agreements between spouses are not intended to be legally binding: see Balfour v Balfour [1919] 2 KB 571; Cohen v Cohen (1929) 42 CLR 91, 96; Birmingham v Renfrew (1937) 57 CLR 666, 682. In the same case Latham CJ said at 674-5:
"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".
25 In cases of the present kind, as Viscount Haldane said in Gray v Perpetual Trustee Co Limited [1928] AC 391 at 400 a definite agreement to constitute equitable interests must be shown to have been made "and without such a definite agreement there can no more be a trust in equity than a right to damages at law".
26 The need to prove a legally binding contract has always been insisted upon in these cases. See In re Cleaver [1981] 1 WLR 939, 947, 949. In a number of the earlier cases the Judges referred to agreements to make mutual wills and leave them unrevoked, but they made it clear, as Viscount Haldane did in the passage quoted above from Gray v Perpetual Trustee Co Limited, that the agreement had to be legally binding. In some recent cases the judges have referred to the need for plaintiffs in such cases to prove "a contract at law". See In re Dale [1994] Ch 31, 38; Aslan v Kopf (CA 16 May 1995 unrep per Gleeson CJ at pp 3-4); In re Goodchild [1997] 1 WLR 1216, 1224 CA; Bigg v Queensland Trustees Ltd [1990] 2 QdR 11, 13. However in the seminal case Dufour v Pereira (1769) Dick 419 [21 ER 332] Lord Camden, in the passage quoted by Dixon J in Birmingham v Renfrew (1937) 57 CLR 666 at 686, referred to contract more than once.
27 The making of mutual wills in reciprocal terms is some evidence of the making of such a contract (Gray v Perpetual Trustee Co Ltd at 400), but without more "does not of necessity imply any agreement beyond that so to make them" (Gray v Perpetual Trustee Co Ltd at 400). The existence of such wills is consistent with a consensus between the spouses which they did not intend to be legally binding, or with an agreement that wills be made in that form without any agreement that they could not be revoked. The search for proof of contractual contention is not confined. As Hammond J said In re Newey [1994] 2 NZLR 590 at 595:
"All the surrounding circumstances, the history, the factual matrix, are to be taken into account in deciding whether there was such an arrangement. The Court will look at all the circumstances and draw any appropriate inferences".
28 In the present case there is little more than the making of the wills and the situation of the spouses and their families. The wills instruction sheet completed by the officer in the Public Trustee's Office on 10 March 1986 became Ex A. This recorded that at the start of the interview Mr and Mrs McDonnell had not decided how their property should be divided, but agreement was reached later in the interview, which was reflected in their mutual wills. The trust officer himself was not called, nor was his absence explained. Moreover there was no evidence of any standing instructions to such officers on the advice to be given to parties wishing to make mutual wills, or the form in which such wills should be made.
29 There was evidence of statements later made by Mr McDonnell about his expectations for the ultimate destination of his property after the death of the survivor. However there was no evidence of any conversations which involved Mrs McDonnell, or which took place in her presence, when silence may have been evidence of assent sufficient to establish contractual intent. See In re Williams [1933] Ch 244, 250.
30 The wills themselves may evidence the making of a contract as in Dufour v Pereira and In re Hagger [1930] 2 Ch 190 where the parties had made a joint will. However mutual wills in reciprocal form which do not in terms evidence such an agreement have never been sufficient on their own to establish a binding contract. See In re Oldham [1925] 1 Ch 75; Gray v Perpetual Trustee Company Limited [1928] AC 391.
31 In the other cases there has been direct evidence of a contract. One of the parties may have taken the trouble to have the contract acknowledged by the other in the presence of members of the family, it may have been proved by the solicitor who prepared the wills, or it may have been proved by the survivor. Cases of this nature include In the Estate of Heys [1914] P 192 (evidence of solicitor); In re Williams [1933] Ch 244 (evidence of solicitor); Birmingham v Renfrew (1937) 57 CLR 666 (evidence of family); In re Cleaver [1981] 1 WLR 939 (evidence of family); Bigg v Queensland Trustees Ltd [1990] 2 QdR 11 (evidence of survivor); Re Newey [1994] 2 NZLR 590 (evidence of family).
32 The onus of proof in these cases is the civil onus, but it is not easily discharged. In Birmingham v Renfrew (above) at 674, Latham CJ said:
"Those who undertake to establish such an agreement assume a heavy burden of proof. It is easy to allege such an agreement after the parties to it have both died".
33 Dixon J said at 681:
"Such an agreement can be established only by clear and satisfactory evidence".
34 If there was a definite contract between Mr and Mrs McDonnell of the type alleged Mr McDonnell trusted his wife and did not take the precaution of having her acknowledge their bargain before his children.
35 My initial reaction in this case was that where spouses each have children from an earlier marriage, the making of mutual and reciprocal wills established a case which spoke for itself and was sufficient proof of a contract. This indeed was the view of Isaacs J in Hudson v Gray (1927) 39 CLR 473, which was the subject of the appeal in Gray v Perpetual Trustee Co Limited [1928] AC 391. Isaacs J referred to evidence that the spouses in that case had agreed to make mutual and reciprocal wills and held that a contract had been established. He said at 485, 487:
"Reciprocity of action and benefit (and therefore condition) is imported by an agreement to make mutual wills. I see no reason in the circumstances of this case … for denying to the agreement … the quality of a binding and enforceable and, … specifically enforceable contract. … The wills were necessarily separate instruments, but their dual execution was one transaction springing out of a mutual agreement that was manifestly intended to be reciprocally carried out and faithfully adhered to as a binding obligation. To contemplate either or both of the parties afterwards exercising independent testamentary disposal contrary to the arrangement, would be to contemplate defeating the bargain … where there is such an intended obligation, which is indeed essential to every contract, the nature of the transaction, in the absence of expression to the contrary, may lead to the implication that the will … will not be, in fact, revoked".
36 That view did not prevail in the Privy Council and the law has been settled to the contrary ever since. There is no support in the cases for raising an implication of a binding contract from the mere fact that the parties have children from prior marriages.
37 There are a number of decisions involving couples in this situation, and others where the couple were childless but each had relatives, where a contract was either not established or the family situation was not considered decisive. These include In re Oldham [1925] Ch 75 (childless couple); Birmingham v Renfrew (1937) 57 CLR 666 (childless couple); In re Cleaver [1981] 1 WLR 939 (childless couple, husband having children by earlier marriages); Bigg v Queensland Trustees Limited [1990] 2 QdR 11 (spouses with children from earlier marriages); and Re Newey [1994] 2 NZLR 590 (ditto).
38 In the state of the evidence, the appellants cannot gain any support from decisions in Canada and the United States either. In re Gillespie (1968) 3 DLR (3d) 317 (Ont CA) a contract was found but the parties had made a joint will, and in Harvey v Estate of Powell (1988) 30 ETR 143 and Patamsis Estate v Bajoraitis (1994) 2 ETR (2d) 200 the plaintiffs failed to prove contracts, although in both cases the spouses had a child or children from previous marriages.
39 The United States authorities, some of which are referred to below, show that the same broad principles are applied in the many jurisdictions of that country. In Lawrence v Ashba (1945) 59 NE (2d) 568, Draper CJ said at 570:
"The burden of proving that mutual and reciprocal wills were made pursuant to a valid and enforceable contract is upon those who assert such to be true, and the evidence thereof must be full and satisfactory".