Dr Stephen JanesBarrister Deputy DeanSchool of LawUniversity of Western Sydney

ESTOPPEL AND TESTAMENTARY SUCCESSION

– RECENT DEVELOPMENTS

A person may make many types of representations about what will happen to their property upon death.

In what circumstances will these representations be binding upon the estate?

The representation may constitute:A testamentary contract (including a mutual will)

Estoppel

INTRODUCTION

Testamentary Contracts are in all respects contracts but are constituted by promises as to one’s testamentary dispositions supportable by consideration.

Testamentary Contracts comprise:Contracts to leave specific property by will to another

Contracts to leave the entire estate to another

Contracts not to revoke a willMutual wills

TESTAMENTARY CONTRACTS

Example: A promise to leave specifi c reality by will in return for a promise to marry; Synge v Synge [1894] 1 QB 466.

Specifi cally enforceable in equity. If property left otherwise than to the promisee then a benefi ciary who takes under a will contrary to the promise holds the gift on a constructive trust for the promisee.

Enforceable at common law by way of damages for breach of contract being the value of the property at death.

The promisee may elect as to whether to proceed in equity or at common law.

The promisee may proceed during the lifetime of the promisor if aware of the breach of the promisee but if seeking damages these will adjusted for contingencies.

CONTRACTS TO LEAVE PROPERTY

Is a promise only to leave what is left at death and not to preserve property until death; Palmer v Bank of New South Wales (1975) 133 CLR 150.

The contract will be breached only if the promisor makes in their lifetime what is in substance a testamentary disposition contrary to the promise; Palmer v Bank of New South Wales (1975) 133 CLR 150 at 159 per Barwick CJ but c.f. Birmingham v Renfrew (1937) 57 CLR 666 at 689 per Dixon J.

CONTRACTS TO LEAVE THE ENTIRE ESTATE

The parties intend to enter a legally binding agreement as to the disposition of their respective estates; Birmingham v Renfrew (1937) 57 CLR 666. However there must be clear and satisfactory evidence of the agreement; Walters v Olins [2009] Ch 212 at [36].

Example: A husband promises that if he survives his wife then he will leave his estate to a designated third party. The wife in response to this promise then promises to make a will leaving her estate to her husband and vice versa.

If the husband survives the wife and takes her estate but the changes in his will in favour of other benefi ciaries then equity will compel these benefi ciaries to hold their gift on a constructive trust for those designated to benefi t under the mutual will agreement.

The equity arises as a result of the husband allowing his wife to die believing the agreement will be fulfi lled.

MUTUAL WILLS

The mutual wi l l agreement need not be constituted in a formal written document. I t may arise from discussions between family members; Albrow v Cunningham [2000] NSWSC 103. Some factors to consider:

To how many people the statement was made

Whether there is a statement in writ ing  The consideration off ered for the promise  The number of t imes the statement was made  The language used by the part ies  The context in which the promise was made  The nature of the relat ionship between the part ies  The certainty of the terms

MUTUAL WILLS - PROOF

It has been held that to transfer a property inter vivos, but continue to live in it and pay the rates and charges, if done with intent to defeat the agreement is suffi cient to constitute a breach of a mutual will agreement; Bauer v Hussey [2010] QSC 269 at [32] but this is inconsistent with Palmer but in line with Dixon J in Birmingham.

Disposal of property by the survivor of a mutual will agreement that is the subject of the agreement may constitute a breach of that agreement that could be restrained by injunction in the lifetime of the survivor; Walters v Olins [2009] Ch 212 at [42].

MUTUAL WILLS - BREACH

Certain representations as to a persons testamentary wishes not amounting to a contractual promise may give rise to a proprietary estoppel.

By contrast to promissory estoppel which arises from an existing legal relationship usually a contract but need not relate to any proprietary interest. The distinction between the two has been removed in favour of equitable estoppel; Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387.

As Hoff mann LJ said in Walton v Walton (unreported) 14 April 1994; [1994] CATranscript No 479, para 21,

equitable estoppel [by contrast with contract] . . . does not look forward into the future [; it] looks backwards from the moment when the promise falls due to be performed and asks whether, in the circumstances which have actually happened, it would be unconscionable for the promise not to be kept.

There must be assurance, reliance and detriment to establish proprietary estoppel; Thorner v Major [2009] 1 WLR 776 at [55].

ESTOPPEL - GENERAL

In Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 at 428-29, Brennan J stated that to establish equitable estoppel: the plaintiff assumed or expected that a particular legal

relationship would exist with the defendant and the defendant would not be free to withdraw from that relationship;

the defendant induced the plaintiff to adopt the assumption or expectation;

the plaintiff acts or abstains from acting in reliance on the assumption or expectation;

the defendant knew or intended him to do so; the plaintiff 's action or inaction will occasion detriment if

the assumption or expectation is not fulfilled; the defendant has failed to act to avoid that detriment.

EQUITABLE ESTOPPEL

The diffi culty with testamentary representations amounting to an estoppel was the notion that a will is always understood to be revocable.

Early cases focused upon the need for an irrevocable promise. This approach was rejected in Gillet v Holt [2001] Ch 210 in favour considering whether allowing the testator to go back on the representation would in all the circumstances be unconscionable.

ESTOPPEL – TESTAMENTARY SUCCESSION

Must be in respect of identifi able property to be suffi ciently certain; Thorner v Major [2009] 1 WLR 776.

The property may change over time but it still must be identifi able.

Must be as to future intention not present intention; May arise by way inference from statements and conduct; However there must be evidence of representations by the

testator and not by a third party such as a deceased parent who was a prior owner of the property; Hampson v Hampson [2010] NSWCA 359.

What matters is whether the representation could in all the circumstances be reasonably understood as intended to be relied upon by the representee. The actual act of reliance need not be foreseen; Thorner v Major [2009] 1 WLR 776 at [5].

THE REPRESENTATION

There must be detrimental reliance. This need not be expending money or financial detriment but it must be something substantial; Gillet v Holt at 232.

It is the substantial detrimental reliance that gives rise to the issue of whether it would be unconscionable to allow the representor to go back on the representation. Mere disadvantage is not enough; Duic v Duic [2013] NSWCA 42 at [20].

A person does not need to show there was some alternate course of action that would have been open to them; Wardell v Wardell [2012] NSWCA 214 at [67].

The estoppel can arise in the lifetime of the representor such as where property is disposed of or there is a change in testamentary intention; e.g. Gillet v Holt

RELIANCE AND DETRIMENT

In the determination of the relief to be granted in equitable or proprietary estoppel cases, the notion of enforcement or vindication only of the “minimum equity” is not a governing principle, rather relief should be based upon what is necessary to remedy the unconscionable conduct; Giumelli v Giumelli (1999) 196 CLR 101 at 123–125.

Matters that can assuage the detriment brought about by the resil ing from the representation or encouragement by the party concerned are relevant to such determination; Delaforce v Simpson-Cook (2010) 78 NSWLR 483 at [3]; [6]; [59].

Proportionality may be relevant but normally the court wil l give eff ect to the expectation in land that has been created by the defendant’s conduct; Ramsden v Dyson (1866) LR 1 HL 129 at 170 per Lord Kingsdown.

Equitable compensation may be awarded in some cases as the most appropriate remedy even in the l ifetime of the representor but subject to a discount; Quinn v Bryant  [2012] NSWCA 377.

REMEDIES

The principal contingency that eff ects both a promissee under a contract and the representee under an estoppel is a claim for a Family Provision Order.

Distinction drawn in Barns v Barns (2003) 214 CLR 169 between inter vivos promises and testamentary promises.

A testamentary contract is subject to a FPO as Chapter 3, Succession Act 2006 operates upon then net estate of the deceased being the property available for distribution under a will or on intestacy.

By analogy estoppel based upon testamentary representations is so subject to an FPO as the representation relates to the distributable estate.

CONTINGENCIES

QUESTIONS?THANK YOU