Maria Vittoria Fazari as Executrix of the Estate of Domenico Antonio Cosentino (Dec) v Cosentino - [2010] WASC 40

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: MARIA VITTORIA FAZARI As Executrix of the Estate of DOMENICO ANTONIO COSENTINO (DEC) -v- COSENTINO [2010] WASC 40

CORAM: LE MIERE J

HEARD: 2 & 3 JULY 2009

DELIVERED : 5 MARCH 2010

FILE NO/S: CIV 1445 of 2008

BETWEEN: MARIA VITTORIA FAZARI As Executrix of the Estate of DOMENICO ANTONIO COSENTINO (DEC)
First Plaintiff
MARIA VITTORIA FAZARI
Second Plaintiff
AND
IMMACOLATA COSENTINO
First Defendant
ANTONIO BRUNO COSENTINO
Second Defendant

Catchwords:

Will - Mutual wills agreement - Transfer of property by survivor - Whether transfer calculated to defeat the intention of the mutual wills agreement - Whether transfer testamentary in nature - Whether in breach of mutual wills agreement - Turns on own facts

Contract - Mutual wills agreement - Implied terms - Whether promise not to revoke wills contains implied term not to dispose of property inherited through survivorship during his or her lifetime

Legislation:

Supreme Court Act 1935 (WA), s 25(10)

Result:

Application dismissed

Category: B

Representation:

Counsel:

First Plaintiff                :     Mr P J Hannan
Second Plaintiff            :     Mr P J Hannan
First Defendant             :     Mr J C Curthoys
Second Defendant         :     Mr J C Curthoys

Solicitors:

First Plaintiff                :     Aherns Lawyers
Second Plaintiff            :     Aherns Lawyers
First Defendant             :     GG Legal
Second Defendant         :     GG Legal

Case(s) referred to in judgment(s):

Barns v Barns [2003] HCA 9; (2003) 214 CLR 169
Birmingham v Renfrew (1937) 57 CLR 666
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Edell v Sitzer (2001) 55 OR 3d 198; (2001) Can LII 27989
Gregor v Kemp (1722) 3 Swans 482; (1722) 36 ER 926
Healey v Brown [2002] EWHC 1405 (Ch); [2002] WTLR 849
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Olins v Walters [2007] EWHC 3060 (Ch); [2008] WTLR 339
Palmer v Bank of New South Wales (1975) 133 CLR 150
Re Cleaver [1981] 1 WLR 939
Re Hagger [1930] 2 Ch 190
Schaefer v Schuhmann [1972] AC 572
Walters v Olins [2008] EWCA Civ 782; [2009] Ch 212

LE MIERE J:

Introduction

This action concerns things done by members of the Cosentino family. For the sake of brevity I will refer to members of the family by their given names, as did counsel in the course of the hearing. In doing so I mean no disrespect to anyone.
The plaintiff (Maria) and the second defendant (Antonio) are the only children of the marriage of the first defendant (Immacolata) and the late Domenico Cosentino (Domenico). On 18 June 1997 Domenico and Immacolata each made a will. Each of them stated in their will that it was made on the understanding that the other would execute a will in substantially identical terms and would not revoke or vary the will except with the written consent of the other during his or her lifetime and after his or her death only with the written consent of his or her executor. By their wills Domenico and Immacolata each appointed Maria as executor. Subject to one exception, Domenico and Immacolata each left the whole of their estate to the other and in the event of the other predeceasing him or her then left their estate to be divided equally between Maria and Antonio. The exception was that Domenico left 23 Warrajah Street to Antonio.
At the time of his death Domenico was the sole registered proprietor of 23 Warrajah Street and had an interest as sole registered proprietor or registered proprietor together with Immacolata as tenants in common or joint tenants in four other properties. On Domenico's death Maria, as executor of Domenico's will, caused 23 Warrajah Street to be transferred to Antonio and Domenico's interest in the other properties, including 53 Osborne Place, to be transferred to Immacolata.
Maria says that at the time of executing their wills Immacolata and Domenico made a contract (the mutual wills agreement). Maria says that on the death of Domenico Immacolata holds all of the property that passed to her under Domenico's will or by survivorship upon constructive trust for Maria and Antonio in equal shares.
On 21 February 2005 Immacolata executed a further will. By that will Immacolata appointed Maria and Antonio as executors and left the whole of her estate to Maria and Antonio. On 9 July 2007 Immacolata gifted 53 Osborne Place to the trustees for the A Cosentino Family Trust. On 15 July 2007 Immacolata made a further will by which she appointed Antonio as executor and left specified properties to Antonio and other specified properties to Maria.
In essence, Maria's case is that in executing their mutual wills Domenico and Immacolata agreed that the survivor would continue and not revoke the bequest of his or her estate to Antonio and Maria in equal shares and that the transfer of 53 Osborne Place by Immacolata into the joint names of herself and Antonio as trustees for the A Cosentino Family Trust reneged on that agreement and constituted an equitable fraud on Domenico. Maria contends that each of the properties of which Immacolata is the registered proprietor are held by her on a constructive trust and the terms of the trust are those of Immacolata's 1997 will. Maria contends that 53 Osborne Place is held by Immacolata and Antonio as constructive trustees and the terms of the trust are those of Immacolata's 1997 will. Maria contends that she is entitled to have 53 Osborne Place transferred to Immacolata.
The defendants, Antonio and Immacolata, concede that Domenico and Immacolata made an agreement by which Immacolata agreed to execute a will in substantially the same terms as Domenico and not to revoke the will except with his consent during his lifetime or after his death with the consent of his executor. However, the defendants say that the effect of the mutual wills agreement was not to crystallise the assets of Domenico as at the date of his death so that Immacolata cannot dispose of them. Since Immacolata survived Domenico her 1997 will obliged her to leave her estate equally to Antonio and Maria but the terms of the will do not require Immacolata to leave the properties she received from Domenico's estate to Antonio and Maria equally. The defendants say that Immacolata's obligation was to leave her will unchanged and to leave her property as at the date of her death in accordance with the terms of that will. The estate that is to be left in accordance with her will is her estate at the date of her death. The defendants say the mutual wills agreement does not require Immacolata to retain any property she owned at the date of Domenico's death or received from his estate until her death. Accordingly, she was entitled to transfer 53 Osborne Place to the trustees of the A Cosentino Family Trust and is free during her lifetime to dispose of her property as she wishes.

The mutual wills

The principal provisions of Domenico's will are:
(a)I appoint my daughter, Maria, to be the executor and trustee;
(b)I give my son Antonio 23 Warrajah Street;
(c)If my wife Immacolata survives me by 30 days I give the balance of my estate to her; and
(d)If my wife does not survive me by 30 days my executors hold my estate on trust to be divided equally between my children Antonio and Maria.
The principal provisions of Immacolata's 1997 will are:
(a)I appoint my daughter, Maria, to be the executor and trustee;
(b)If my husband Domenico survives me by 30 days I give the balance of my estate to him;
(c)If my husband does not survive me by 30 days my executors hold my estate on trust to be divided equally between my children Antonio and Maria.
Each of the wills contains a clause:
I declare that this will is made on the understanding that [my spouse] will prepare and execute a will in substantially identical terms on the same date as myself and that [his/her] will cannot be revoked or varied save with my written consent during my lifetime and after my death only with the written consent of my executor.

The properties

53 Osborne Place, Stirling, is a 4,015 sqm property. It was the family home of Domenico, Immacolata, Maria and Antonio. At the time of his death Domenico was the sole registered proprietor of 53 Osborne Place. Domenico and Immacolata also owned properties nearby in Warrajah Street, Stirling. At the time of Domenico's death he was the sole registered proprietor of 11 and 23 Warrajah Street. Domenico and Immacolata were the registered proprietors of 15 and 35 Warrajah Street as tenants in common in equal shares. Domenico and Immacolata were the registered proprietors of 18 Warrajah Street as joint tenants.
Probate of the will of Domenico was granted to Maria as his executor. Maria, as executor, caused Domenico's interest in the properties at 53 Osborne Place and 11, 15 and 35 Warrajah Street to be transferred to Immacolata. Immacolata was registered as the sole registered proprietor of 18 Warrajah Street by survivorship. Maria caused 23 Warrajah Street to be transferred to Antonio to give effect to the terms of Domenico's will.

Immacolata's further will

In February 2005 Immacolata executed a further will by which she appointed Maria and Antonio as executors and left the whole of her estate to Maria and Antonio.
Immacolata made a further will on 15 July 2007. The principal terms of that will are:
(a)I appoint Antonio to be the executor and trustee;
(b)I give Unit 15, Unit 15A and Unit 18 Warrajah Street and 53 Osborne Place to Antonio;
(c)I give Unit 20, Unit 35 and Unit 35A Warrajah Street to Maria.
(d)I give the balance of my estate to Maria.

A Cosentino Family Trust

The A Cosentino Family Trust was established on 5 July 2007. The trust is a discretionary trust. The trustee has an absolute discretion to distribute income or any part of the trust fund to any one or more of the beneficiaries. The trustees are Immacolata and Antonio. The named beneficiaries are Immacolata, Antonio and Antony Cosentino, Antonio's son. The further beneficiaries include relatives of the named beneficiaries, including the children and grandchildren of the named beneficiaries. The appointor may remove a trustee at any time and may appoint additional or replacement trustees at any time. The appointor is Antonio.
Immacolata and Antonio, as trustees of the A Cosentino Family Trust, hold 53 Osborne Place on trust for the beneficiaries of the A Cosentino Family Trust.

Immacolata's intention

Maria says that the dealings by Immacolata in gifting 53 Osborne Place to herself and Antonio as trustees for the A Cosentino Family Trust were calculated by Immacolata and/or Antonio to defeat the mutual intention of Domenico and Immacolata that each of them would make a will in substantially identical terms to the other and would not revoke or vary the will except with the consent of the other during his or her lifetime or with the consent of the executor.
I find that Immacolata gifted 53 Osborne Place to herself and Antonio as trustees for the A Cosentino Family Trust, revoked her 1997 will and made her 2007 will for the purpose of, and with the intention that, 53 Osborne Place should pass to or for the benefit of Antonio. That inference may be drawn from the whole of the evidence.
Maria gave evidence by affidavit that was not challenged. Maria's affidavit evidence establishes the following. Around the time of Domenico's death Antonio occasionally said in front of Immacolata and Maria that he would like to develop 53 Osborne Place. Between the time of Domenico's death and July 2007 Immacolata told Maria on a number of occasions that Antonio wanted to develop 53 Osborne Place. In or about late 2006 or early 2007 Immacolata said to Maria that Antonio would like 53 Osborne Place one day. At about the same time Maria had a conversation with Immacolata in which Immacolata said that on her death Antonio wanted 53 Osborne Place and would pay out Maria by paying a small amount of money over time. Maria asked Immacolata what if she (Maria) wanted to buy 53 Osborne Place. Immacolata said words to the effect:
'No, you can't have it. [Antonio] wants it'.
In July 2007 Immacolata and Antonio signed the 'contract for sale of land or strata title by offer and acceptance' by which Immacolata gifted 53 Osborne Place to Antonio as trustee for the A Cosentino Family Trust. Subsequently Immacolata and Antonio executed a transfer and a declaration of trust, which instruments were lodged at the Land Titles Office. Neither Antonio nor Immacolata informed Maria of those dealings.
The effect of the transfer was to divest Immacolata of any beneficial proprietary interest in 53 Osborne Place. Immacolata is a trustee of the A Consentino Family Trust. As trustee she has a legal interest but no beneficial interest in the trust property. Immacolata is a further beneficiary of the trust. As a beneficiary Immacolata has a right to due administration of the trust, that is, a right to force the trustee to perform the trust. However, she has no proprietary interest in the trust property. Together with Antonio she has the power to distribute any part of the trust property to any one or more of the beneficiaries. She does not have the power to dispose of 53 Osborne Place by her will. However, Immacolata does not appear to have understood that. On 15 July 2007 Immacolata made her 2007 will. In that will she purports to leave 53 Osborne Place to Antonio notwithstanding that she had already transferred the property to herself and Antonio as trustees for the A Cosentino Family Trust. The terms of Immacolata's 2007 will demonstrate her intention that ownership of 53 Osborne Place was ultimately to pass to Antonio.
Immacolata changed her 1997 will without telling Maria. Maria had a conversation with Immacolata shortly after Immacolata had made her 2007 will. Immacolata initially denied having changed her will but then conceded that she had. During a conversation with Maria after Immacolata had made her 2007 will Immacolata said words to the effect that she had changed her will so that Antonio can have 53 Osborne Place. In subsequent conversations with Maria Immacolata again said that Antonio wanted 53 Osborne Place.
Jason Fazari gave unchallenged affidavit evidence that Immacolata had said that Antonio needed to have 53 Osborne Place so that he would have something to give his children.
The inference that Immacolata gifted 53 Osborne Place to the trustees for the A Cosentino Family Trust and made her 2007 will for the purpose and with the intention that the ownership of 53 Osborne Place should ultimately pass to Antonio and not to Antonio and Maria equally as provided for in Immacolata's 1997 will is open on the evidence. Immacolata did not give evidence. Her failure to give evidence is unexplained. Where, as here, the inference is open from the facts proved by direct evidence and the question is whether it should be drawn, the circumstance that Immacolata might have proved the contrary had she chosen to give evidence is properly to be taken into account as a circumstance in favour of drawing the inference: Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298. I do draw the inference.

The doctrine of mutual wills

Where two testators each make a will containing corresponding provisions as to the disposition of property under them, and agree that they will not revoke their wills, then, on the death of the first testator, the survivor holds his or her property on trust for the person(s) to whom it was agreed that it should be left. In Birmingham v Renfrew (1937) 57 CLR 666 Dixon J described the doctrine as follows:
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 valid as a 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 will (683).

There was a mutual wills agreement

The defendants accept that the wills of Domenico and Immacolata executed on 18 June 1997 constitute or evidence an agreement amounting to a contract that the survivor shall not revoke his or her will after the death of the other except with the permission of the executor of the will of the deceased. The defendants agree that there was an agreement between Domenico and Immacolata as to the binding disposition of property. They also agree that the agreement can be enforced by Maria as a beneficiary of the mutual wills. The issue in this case concerns the nature of the obligation on Immacolata after the death of Domenico: to what extent can Immacolata dispose during her lifetime of the property she took under Domenico's will and of the property of which she was the owner at the time of his death?

The trust arises on the death of the first testator

In Birmingham v Renfrew Joseph Russell made a will by which he left the residue of his estate to his wife, Grace, and if she should predecease him, to four of his wife's relatives. The following day Grace made a will in which, after providing for certain family legacies, she left the residue of her estate to Joseph and in the event that he did not survive her, to her four relatives. Grace died and Joseph took the residue of her estate. Joseph survived his wife for some time but eventually died having several times changed his will and leaving a final will which benefitted his own relatives to the detriment of his wife's relatives. The High Court held that Joseph was bound after Grace's death not to revoke his will. The agreement created a constructive trust that was enforceable in equity by the wife's relatives against Joseph's executors. Dixon J described the obligation on the survivor as a floating obligation suspended during the lifetime of the survivor which descends upon the assets at his death and crystallises into a trust. Dixon J said:
It is only by the special doctrines of equity that such a floating obligation, suspended, so to speak, during the lifetime of the survivor can descend upon the assets at his death and crystallize into a trust (689).
In Barns v Barns [2003] HCA 9; (2003) 214 CLR 169 Gummow and Hayne JJ said that the following points are emphasised in Birmingham v Renfrew and in other decisions:
… (i) it is the disposition of the property by the first party under a will in the agreed form and upon the faith of the survivor carrying out the obligation of the contract which attracts the intervention of equity in favour of the survivor; (ii) that intervention is by the imposition of a trust of a particular character; (iii) the subject matter is 'the property passing [to the survivor] under the will of the party first dying (Birmingham v Renfrew (1937) 57 CLR 666 at 689)'; (iv) that which passes to the survivor is identified after due administration by the legal personal representative (Easterbrook v Young (1977) 136 CLR 308 at 319 ‑ 320) whereupon 'the dispositions of the will become operative' (George Attenborough & Son v Solomon [1913] AC 76 at 83); (v) there is 'a floating obligation' over that property which has passed to the survivor; it is suspended during the lifetime of the survivor and 'crystallises' into a trust upon the assets of the survivor at death (Birmingham v Renfrew (1937) 57 CLR 666 at 689 ‑ 690. Various questions respecting the incidents of the 'floating obligation' remain to be resolved: Underhill & Hayton, Law Relating to Trusts and Trustees, 15th ed (1995), pp 393 ‑ 394) [85].

The property bound by the trust

In Barns v Barns Gummow and Hayne JJ said that the subject matter of the constructive trust is the property passing to the survivor under the will of the party first dying [85]. In Ong DSK, Trusts Law in Australia (3rd ed) Professor Ong queries how it is possible for a floating obligation existing only 'over that property which has passed to the survivor' under the will of the first party to die, to crystallise at the survivor's death upon, not only that property or the residue thereof but also upon the otherwise acquired property of the survivor (548)? Professor Ong suggests:
when Dixon J, in Birmingham v Renfrew, referred to a floating obligation 'during the lifetime of the survivor' ((1937) 57 CLR 666 at 689), he was referring to a floating obligation over all of the assets of the survivor existing from time to time 'during the lifetime of the survivor' ((1937) 57 CLR 666 at 689) so that, at the survivor's death, that floating obligation would crystallise upon all of the assets owned by the survivor at his death, so as to constitute a trust of those assets for the benefit of those persons intended by the parties to the mutual wills compact to benefit (548).
In a recent decision of the England and Wales Court of Appeal, Walters v Olins [2008] EWCA Civ 782; [2009] Ch 212, Mummery LJ, with whom Dyson and Maurice Kay LLJ agreed, expressed a similar view. Mummery LJ said that the case for the existence of mutual wills does not involve making a contractual claim for specific performance and indeed the claimant is not even a party to the contract and does not have to establish that he or she was [36]. Mummery LJ said:
The obligation on the surviving testator is equitable. It is in the nature of a trust of the property affected, so the constructive trust label is attached to it. The equitable obligation is imposed for the benefit of third parties, who were intended by the parties to benefit from it. It arises by operation of law on the death of the first testator to die so as to bind the conscience of the surviving testator in relation to the property affected [37].
It is primarily a question of construction to determine what property is bound by the trust. That is because the trust operates to impose upon the survivor an obligation to dispose of his or her property in accordance with the terms of his or her will made pursuant to the mutual wills agreement. In this case, Immacolata's 1997 will provided for the whole of her property to be divided equally between Antonio and Maria. Therefore, the trust attaches to the whole of Immacolata's property, not merely the property that passed to her under Domenico's will.

Limits on survivor's power of disposition during her lifetime

The doctrine of mutual wills operates to prevent the survivor disposing of the trust property by will in a manner inconsistent with the mutual wills agreement. This does not mean that the survivor cannot dispose of the property during his or her lifetime.
In Birmingham v Renfrew Dixon J said that the purpose of an arrangement of mutual wills must often be, as in that case, to enable the survivor during his life to deal as absolute owner with the property passing under the will of the party first dying. Therefore, the object of the transaction is to put the survivor in a position to enjoy for his or her own benefit the full ownership, a consequence being that he or she may convert it and spend the proceeds if he or she chooses. But when he or she dies he or she is to bequeath what is left in the manner agreed upon (689).
It may be argued that there must be a limit to the powers of the survivor to dispose of the property subject to the constructive trust, otherwise the entire purpose of the mutual wills agreement could easily be defeated. In Mitchell J D B, 'Some Aspects Of Mutual Wills' (1951) 14 MLR 136 JDB Mitchell said it would seem absurd if the court is prepared to prevent the surviving testator breaking faith with the first testator to die only to the extent of preventing inconsistent testamentary dispositions and allowing him to make the arrangement nugatory by dispositions during his lifetime (140).
In Cassidy J, 'Osborne v Estate of Osborne' [2003] MULR 9 Professor Cassidy argues that a breach of a mutual wills agreement may arise by the surviving testator gifting the trust property. In support of that proposition Professor Cassidy cites: Gregor v Kemp (1722) 3 Swans 482; (1722) 36 ER 926, 926 (Lord Macclesfield LC); Re Hagger [1930] 2 Ch 190, 195 (Clauson J); Birmingham v Renfrew, 689, 690 (Dixon J); Schaefer v Schuhmann [1972] AC 572, 599 (Lord Simon); Re Cleaver [1981] 1 WLR 939 (Nourse J); Healey v Brown [2002] EWHC 1405 (Ch); [2002] WTLR 849 [13] ‑ [14] (Donaldson J).
The principle that emerges from the cases referred to by Professor Cassidy is that the surviving testator will not be permitted fraudulently, in the sense used in equity, to render his or her promise nugatory by making substantial gifts during his or her lifetime.
In Birmingham v Renfrew Dixon J said:
No doubt gifts and settlements, inter vivos, if calculated to defeat the intention of the compact, 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 (689).
Latham CJ agreed, saying:
In the present case the promise by the husband was a promise to leave his property to certain persons by will, including such property as his wife might leave to him by her will, less, as my brother Dixon has explained… such amount of that property as he might have bona fide disposed of during his lifetime (677).
The nature of the trust that binds the property subject to the agreement and the extent to which the survivor is free to deal with property during his or her lifetime depends ultimately on the terms of the agreement between the testators. In Walters v Olins Mummery LJ referred at [38], with approval, to the analysis of Norris J at first instance in Olins v Walters [2007] EWHC 3060 (Ch); [2008] WTLR 339 at [9]. Norris J said that if the facts establish that testators made mutual wills pursuant to a contract not to revoke them:
then upon the death of T1 equity will impose upon T2 a form of constructive trust (shaped by the exact terms of the contract that T1 and T2 have made). The constructive trust is imposed because T1 has made a disposition of property on the faith of T2's promise to make a will in form Y, and with the object of preventing T1 from being defrauded.
Mummery LJ at [40] also referred with approval to the sentence in Snell's Principles of Equity (31st ed) [22‑31]:
Mutual wills provide an instance of a trust arising by operation of law to give effect to an express intention of the two testators.
In Edell v Sitzer (2001) 55 OR 3d 198; (2001) Can LII 27989 (ON SC) Cullity J in the Ontario Supreme Court said:
It should also follow that the nature and extent of the property to which the trust attaches and the rights of the survivor to consume or dispose of it after the other's death should depend upon the terms of the agreement as disclosed by the evidence …[64].
In Healey v Brown Mrs Brown and her husband were beneficial joint tenants of a flat that was their matrimonial home. They agreed to make mutual wills in identical form. Each left the whole of his or her 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 of his or her interest in the flat. The remainder of the estates were left to the defendant who was Mr Brown's son by an earlier marriage. In pursuance of the agreement they executed identical wills in 1996. In January 1997 Mrs Brown died having left her will unrevoked. In August 1997 Mr Brown transferred the flat 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 to his will. Ms Healey contended that the transfer of the flat by Mr Brown into the joint names of himself and his son after the death of his wife reneged on the agreement and constituted a fraud on Mrs Brown. Ms Healey contended that the flat was held by the defendant on trust for her and that she was entitled to have the flat transferred to her. The defendant accepted that the wills of Mr and Mrs Brown satisfied the mutual wills test. David Donaldson QC sitting as a Deputy High Court judge said that the court had to 'examine whether the transfer of the property was contrary to the terms of the compact imbedded in the mutual wills, and if so whether it gave rise to any proprietary consequences' [10]. Mr Donaldson QC said that the 'first task must be to ascertain what (if any) obligations and restrictions in relation to the relevant property are imposed on a surviving testator who has executed a mutual will and undertaken not to revoke it' [11]. Mr Donaldson QC said that the 'starting point must be the text of the wills and in particular of the bequest clause identifying and disposing of the property to be left to the claimant' [11]. His Honour at [13] referred to the judgment of Dixon J in Birmingham v Renfrew:
'In Re Oldham [1925] Ch 75 Astbury J pointed out, dealing with the question whether an agreement should be inferred, that in Dufour v Pereira, 1 Dick 419 the compact was that the survivor should take a life estate only in the combined property. It was, therefore, easy to fix the corpus with a trust as from the death of the survivor. But I do not see any difficulty in modern equity in attaching to the assets a constructive trust which allowed the survivor to enjoy the property subject to a fiduciary duty which, so to speak, crystallised on his death and disabled him only from voluntary dispositions inter vivos.'
His Honour then continued:
Though not developed by Dixon J, and perhaps unimportant on the facts of the present case, it would seem that where the fiduciary duty is breached by such a voluntary disposition inter vivos of the property in question, the 'crystallisation' of the floating obligation must occur at the moment of that disposition.
I would, in line with the observations of Dixon J, have had little difficulty in concluding that a sale at arms length or market price by the survivor, Mr Brown, to permit personal enjoyment of the proceeds was not precluded by the agreement of the parties. But 'gifts and settlements, inter vivos, if calculated to defeat the intention of the compact' would plainly be in breach of it. Had Mr Brown sold the flat and used the proceeds to fund a place in a nursing home, there would have been no basis for complaint. But to give away the flat to his son ‑ with immediate effect as to a 50% undivided share, and with effect on death as to the remainder by operation of the doctrine of survivorship ‑ could scarcely run more directly and fully counter to the intention of the mutual will compact that the flat should pass to his deceased's wife's niece on his own death.
Subject therefore to the impact of the 1989 Act I have no doubt that the mutual wills doctrine would apply in the present case so as to impose in favour of the claimant a constructive trust attaching to the flat [13] ‑ [15].
The Deputy High Court judge held that the doctrine of mutual wills could not be applied on the facts because of a failure to comply with s 2 of the Law of Property (Miscellaneous Provisions) Act 1989 (UK). Although the claimant could not impose mutual wills which would have given rise to a constructive trust affecting the interest in the flat of both Mr and Mrs Brown, the judge was prepared to impose a constructive trust on the grounds of unconscionability but only on Mrs Brown's share. The judge declared that the flat was held on trust by Mr Brown for himself and the claimant in equal shares.
In Sheridan L A, 'The Floating Trust: Mutual Wills' (1977) 15 Alberta Law Review 211 Professor Sheridan poses this question:
If there is a binding arrangement between husband and wife by which each is to leave his property to the survivor, and the survivor is to leave his property to their children equally, and both make wills accordingly, neither will expressly stating that the survivor is to be merely a tenant for life, and the husband dies so that the wife takes his property under his will made in pursuance of the arrangement, to what extent, if at all, can the wife dispose inter vivos of the property she takes under her husband's will (231)?
Professor Sheridan states that:
At one extreme that question may be answered that the wife takes the whole of the husband's property subject to a trust to preserve it all for the children; which is tantamount to saying that, although not so expressed, the true intention of the husband's will was that the property should go to his widow for life, with remainder to the children equally. There is virtually no support in the authorities for such an extreme answer where life interests are not expressly given (231).
Professor Sheridan discusses a number of United States cases which have considered the validity of dispositions inter vivos by the survivor in cases where the arrangement between the testators made no express reference to his powers of dealing with the property otherwise than by will. Professor Sheridan says that:
The approach they have used is based on the idea of preventing fraud as enunciated in Dufour v Pereira (1769) Dick 419, or not allowing the trust, which could not be defeated directly by a new will, to be defeated indirectly by disposal inter vivos (238).
That approach is consistent with the approach of Dixon J in Birmingham v Renfrew and the approach of the court in Healey v Brown. Professor Sheridan refers to a case in which it was said that the surviving wife could make gifts provided that they were reasonable, absolute, bona fide, not testamentary in effect and not made for the purpose of defeating the contract or having that effect (239). Professor Sheridan concludes that the United States courts will give whatever remedy is appropriate to enforce the mutual wills agreement or prevent fraud (240). Professor Sheridan concludes that while many details have not been considered in Commonwealth countries there is no difficulty in policy or concept in construing and enforcing a trust which is to crystallise on death while allowing beneficial enjoyment with limited or unlimited powers of disposition by the legal owner during his lifetime. Professor Sheridan says:
All the terms of the trust, including its date of commencement, depend on the agreement between the parties, and (assuming it is not express) the trust may be implied or constructive as appropriate. If, during the floating stage, the rights of disposal of the legal owner are not absolute, a breach of trust may occur not solely by reason of acts done but also by virtue of the motives with which they are done. There is not repugnancy between the legal owner having rights of enjoyment and disposition and his inability to affect the destiny of the property by a subsequent will: conceptually, the owner can be a trustee for himself for life, have a special or general power of appointment inter vivos, and be a trustee for a remainderman of the property in so far as it is unaffected by a valid exercise of the power (241).
The views of J D B Mitchell, Professor Cassidy, Professor Sheridan and David Donaldson QC in Healey v Brown, support the principle that a promise by will to leave his or her estate to his or her son and daughter equally prevent the testator from disposing of his or her estate on purpose to defeat the promise. Prior to the decision of the High Court in Palmer v Bank of New South Wales (1975) 133 CLR 150 that principle appeared to be consistent with the views of Dixon J and Latham CJ in Birmingham v Renfrew. However, that appears to be not the law in Australia because of Palmer v Bank of New South Wales.

Palmer v Bank of New South Wales

In Palmer v Bank of New South Wales a testator entered into an agreement with a married couple that on the death of his companion they would look after him until his death and if they did so, he would not revoke a will by which he had left the whole of his estate to them. On the death of the companion in 1967 the couple came to live with the testator and looked after him until his death in 1971. In 1970 the testator and a friend opened a joint account with a bank which either could operate. Upon the death of the first to die the survivor would be entitled to the balance of the joint account. The testator and the friend contributed to the account in unequal shares and at the testator's death the account was in credit. The couple brought an action claiming that the balance in the account formed part of the testator's estate. The High Court found that the testator's contributions to the account were made with the knowledge that his obligations to the couple would be diminished and despite the fact that the testator had promised not to revoke his will, he had not promised that his assets at death would include any particular items of property. The High Court held that the testator's actions in opening the account and paying monies into it were not breaches of his promise not to revoke his will and the fact that he contributed to the account with the intention or desire of depleting the estate which might pass under his will did not nullify the transaction.
Barwick CJ, with whom the other members of the High Court agreed, said that it was necessary to emphasise that the promise which had been found was no more at best than a promise to leave the appellants by will the deceased's estate at death and that it was well established that such a promise does not involve an obligation not to part with any property during life (159). Barwick CJ said that such a promise to leave by will does mean that no property will be disposed of in the testator's lifetime by a transaction which in substance, if not in form, is testamentary (159). Barwick CJ referred to the dissenting opinion of Lord Simon of Glaisdale in Schaefer v Schuhmann at 599 in which Lord Simon stated the proposition that in relation to a promise to leave by will the testator will not be permitted fraudulently (in the sense used in equity) to render the promise nugatory by making substantial gifts inter vivos or by way of specific legacy (161).
Barwick CJ referred to earlier English cases and then continued:
These later cases recognized that, in order that a transaction inter vivos be in breach of a promise to leave by will, it must be of a testamentary nature.
It was that nature of the transaction which constituted the breach of the promise. Nowhere in these cases is the mere intention to reduce the value of the estate which will pass by will said to be a breach of such a promise: and, in principle, as I have said, that which is not a breach of the promise can scarce be said to be a fraud on the promise.
It may be that in the circumstances of the case the actions of the mother in Gregor v Kemp (1722) 3 Swans 482 [36 ER 926] might possibly have been regarded as in substance testamentary. But I have no need here to consider whether such a conclusion would have been correct. However, if to dispose of her assets inter vivos absolutely, as it is said in the later case, was no breach of the promise to leave by will, it could not matter, in my opinion, quo animo the disposition was made. It was, in any case, not a breach of the promise. If a promisee desires to prevent such a disposition, the promise itself must be larger than simply a promise to leave by will. If Lord Simon of Glaisdale meant to treat a promise to leave by will as if it involves a promise not to dispose of assets inter vivos so as to deplete the estate at death, that would be to accept a proposition that the cases since Gregor v Kemp have uniformly denied.
In my opinion, there is no equity to nullify a transaction inter vivos which is not itself a breach of a promise to leave by will simply because the promisor enters into the transaction with an intention or desire to deplete the estate which might pass under the will. The rights of the parties under such a contract are contractual. What may be a breach will be determined by the nature and extent of the promise. In my opinion, it is the testamentary nature of the transaction inter vivos which makes it a breach of a promise to leave by will, not the intention with which it is effected.
I agree with the statement by Hutley JA in this case that, 'if the parties intend not only that the testator's general estate, whatever it is, should pass to the promisee on his death, but that his power to use his property in any manner he thinks fit in his lifetime should be curtailed, an express contract to that effect is necessary' [1973] 2 NSWLR at p 255.
It was conceded in Birmingham v Renfrew that the making of an agreement for mutual wills did not preclude the alienation of property during the lifetime of the promisors (1937) 57 CLR at p 675. When in that case Dixon J spoke of 'gifts and settlements, inter vivos … calculated to defeat the intention of the compact' (1937) 57 CLR at p 689 he no doubt had in mind gifts and settlements which were either testamentary in nature or which were in contravention of the terms of the particular contract, spelled out of the expressions actually used, bearing in mind the circumstances in which it was made (161) ‑ (162).

In Barber R, 'The Opening of a Joint Bank Account ‑ a Transaction which may be in Substance if not in Form, Testamentary' (1984‑86) 8 UTas LRev 74 R Barber suggests that the more obvious meaning of Dixon J's statement is that a disposition made by a survivor during his lifetime which is an intended fraud upon his promise to leave his estate in a specified way cannot be made, rather than Barwick CJ's explanation in Palmer v Bank of New South Wales. However, I am obliged to follow the explanation of Barwick CJ with whom the other members of the High Court agreed. Furthermore, the statement of Barwick CJ was approved by Gummow and Hayne JJ in Barns v Barns. In Barns v Barns a husband and wife agreed by deed with their son and with each other that they would make wills in a particular form and that neither of them would revoke their will without the written consent of the other parties. Each will appointed the son as executor and trustee and devised and bequeathed the whole of the estate to him on trust for the surviving spouse or, if there was no surviving spouse, to the son. Gummow and Hayne JJ said:
Undoubtedly the terms of the particular extra‑testamentary obligation are vital to its legal character and operation. The effect of an undertaking such as that by Mr Barns in the Deed was considered in Palmer v Bank of New South Wales (1975) 133 CLR 150. There, Barwick CJ (with whose judgment Gibbs J, Stephen J and Mason J agreed) emphasised that a covenant in this form imposes no obligation to keep until death the assets owned at the time of the exhibition of the will or to keep any particular assets during the remainder of life Palmer (1975) 133 CLR 150 at 159. A line of cases commencing in 1798 with Jones v Martin (1798) 6 Brown 437 [2 ER 1184]; 5 Ves Jun 276 [31 ER 582] was accepted in Palmer as supplying a caveat to these propositions. Of these cases, Barwick CJ said (Palmer (1975) 133 CLR 150 at 159):
'A transaction by which the promisor has placed his property in the name of another and for the benefit of that other on his death, whilst really retaining it for himself in his lifetime, is for the purpose in hand a testamentary transaction which would be in breach of a promise to leave by will.' [69].

Was Immacolata's gift of 53 Osborne Place a gift or settlement inter vivos calculated to defeat the intention of the mutual wills agreement?

The terms of the mutual wills agreement, apparent from the terms of Domenico and Immacolata's mutual wills, is that Immacolata was to have the benefit and enjoyment of 53 Osborne Place, and the rest of her property, during her lifetime and then to pass her remaining estate equally to Antonio and Maria. It is arguable that it would defeat the intention of that agreement for Immacolata to give preference to Antonio over Maria by gifting one or more of her properties to Antonio during her lifetime. However, the decision of the High Court in Palmer v Bank of New South Wales compels me to find that Immacolata's dealing with 53 Osborne Place is not 'a gift or settlement inter vivos calculated to defeat the intention of the' mutual wills agreement unless the transaction by which Immacolata gifted 53 Osborne Place to the trustees for the A Cosentino Family Trust is of a testamentary nature.
There has been no change in the use or enjoyment of 53 Osborne Place since it was transferred to the trustees for the A Cosentino Family Trust. It has not been developed. It has not been rented. Maria gave unchallenged affidavit evidence that in about 2000 Immacolata began sleeping at 18 Warrajah Street and spending her days at 53 Osborne Place. Maria and her son, Paul, each gave unchallenged affidavit evidence to the effect that Immacolata spends her nights and early mornings at 18 Warrajah Street and then goes to 53 Osborne Place where she spends the daylight hours.
Nevertheless, the transfer by Immacolata of 53 Osborne Place to the trustees for the A Cosentino Family Trust divested Immacolata of any beneficial proprietary interest in 53 Osborne Place. In all of the earlier English cases referred to by Barwick CJ in Palmer v Bank of New South Wales as authority for the proposition that an inter vivos gift, which was testamentary in substance if not in form, would be a breach of a covenant to leave property at death by will to the covenantee, the deceased covenantor had settled property during his or her lifetime on strangers to the covenant, but had retained at least an equitable life interest in the property for himself. In each case Barwick CJ concluded, it was this retention of an interest in the property which was held to render the transaction a breach of the covenant. The reasoning underlying that proposition is explained by Barwick CJ:
But such a promise to leave by will does mean that no property will be disposed of in lifetime by a transaction which in substance, if not in form, is testamentary: that is to say, such a promise means that the only testamentary disposition of the property of the promisor shall be by will. A transaction by which the promisor has placed his property in the name of another and for the benefit of that other on his death, whilst really retaining it for himself in his lifetime, is for the purpose in hand a testamentary transaction which would be in breach of a promise to leave by will: see Fortescue v Hennah (1812) 19 Ves Jun 66 [34 ER 443]; Logan v Weinholt (1833)1 Cl & F 611 [6 ER 1046]; Jones v Martin (1798) 6 Brown 437 [2 ER 1184]; 5 Ves Jun 276 [31 ER 582]; and cf Turner v Jennings (1708) 2 Vern 612 [23 ER 1000]; and In re Bennett; Bennett v Bennett [1934] WN 177). The underlying reasoning of those cases is that, whilst the promisor is free to divest himself of the property by a transaction inter vivos, he may not either enter into an illusory transaction whereby he appears, contrary to the reality, to have parted with his property, or into a transaction whereby he keeps an interest in the property during his lifetime, so arranging the transaction that the property passes on his death to the person into whose name he has transferred it. So to do is to deal with the property in a testamentary fashion in breach of the promise (159).
The evidence shows that Immacolata continues to enjoy the use of 53 Osborne Place. Furthermore, it appears from the evidence that she erroneously believes that she retains a sufficient ownership of 53 Osborne Place to be able to leave it to Antonio in her 2007 will. Nevertheless, by gifting 53 Osborne Place to the trustees for the A Cosentino Family Trust Immacolata divested herself of any proprietary beneficial interest in the property. The transaction by which Immacolata gifted and transferred 53 Osborne Place to the trustees for the A Cosentino Family Trust is not of a testamentary nature. The transaction is not a breach of the constructive trust imposed on the property by the mutual wills agreement.

Maria's contract case

Maria pleads that Domenico and Immacolata executed their mutual wills pursuant to the mutual wills agreement. Maria pleads that it was an implied term of the agreement that Immacolata would not dispose of:
1.18 Warrajah Street (which at the formation of the agreement Domenico and Immacolata owned as joint tenants); and
2.any real property passing from Domenico to Immacolata pursuant to Domenico's will;
during Immacolata's lifetime save with the written consent of the executor of Domenico's will.
Maria says that the pleaded implied term is to be implied to give efficacy to the agreement and without the implication of the pleaded term the gifts of real property to Maria and Antonio contemplated by the provision of Immacolata's will would be frustrated.
Maria says alternatively it was an implied term of the agreement that Immacolata would not:
1.dispose of
(a)18 Warrajah Street; and
(b)any real property passing from Domenico to Immacolata pursuant to Domenico's will
during Immacolata's lifetime save for full value; and
2.dissipate the proceeds of sale of those real properties other than in the:
(a)payment of ordinary living expenses; or
(b)acquisition of replacement assets available for distribution to Maria and Antonio under the provisions of Immacolata's will.
Maria says that the alternative implied term is to be implied to give efficacy to the mutual wills agreement and without the implication of the term the gifts of real property to Maria and Antonio contemplated by the provisions of Immacolata's will would be frustrated. Maria says that the ordinary living expenses include not only day‑to‑day living expenses but also expenses incurred in the enjoyment of life (eg holidays etc).
The pleaded implied terms are inconsistent with Palmer v Bank of New South Wales. Barwick CJ was there considering a promise by a testator that he would not revoke a will by which he had left the whole of his estate to the appellants. Barwick CJ said that it is well established that such a promise does not involve an obligation not to part with any property during life (159).
The High Court has repeatedly endorsed the following statement of principle taken from the majority opinion of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283:
For a term to be implied, the following conditions (which may overlap) must be satisfied:
(1)it must be reasonable and equitable;
(2)it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
(3)it must be so obvious that 'it goes without saying';
(4)it must be capable of clear expression;
(5)it must not contradict any express term of the contract.
In Palmer v Bank of New South Wales the High Court said that a bare promise by a testator that he would not revoke a will by which he had left the whole of his estate to beneficiaries does not involve an obligation not to part with any property during his lifetime or, put another way, does not give rise to any implied term that he will not gift any part of his property during his lifetime. There may be facts and circumstances beyond a bare promise by a testator that she or he would not revoke a will by which she or he had left the whole of her estate to named beneficiaries which facts and circumstances are sufficient to give rise to an implied term restricting her power to dispose of property during her lifetime other than by a transaction which is of a testamentary nature. However, Maria has not established any such facts or circumstances in this case. The terms pleaded by Maria are not to be implied into the mutual wills agreement.

Relief claimed

The relief claimed by Maria includes a declaration that upon Immacolata's death, the executor of Immacolata's estate holds all of her estate including 53 Osborne Place and 11, 15, 18 and 35 Warrajah Street upon constructive trust for Maria and Antonio in equal shares. No such declaration should be made. Immacolata is free to dispose of any of those properties during her lifetime providing that she does not do so to defeat the intention of the mutual wills agreement by a transaction that is of a testamentary nature.
The second declaration sought by Maria is that during her lifetime Immacolata holds the properties upon constructive trust for Maria and Antonio in equal shares. I would not make a declaration in those terms. During her lifetime Immacolata holds her property on trust on the terms provided in Immacolata's 1997 will but during her lifetime Immacolata is free to use and dispose of any part of her property except by any transaction which is calculated to defeat the intention of the mutual wills agreement and is of a testamentary nature.
The third declaration sought by Maria is that during her lifetime Immacolata is bound not to dispose, sell, transfer, charge or mortgage the relevant properties without Maria's written consent. Maria seeks an alternative declaration that during her lifetime Immacolata is bound not to dispose of the properties save for full value and is bound not to dissipate the proceeds of sale of the properties other than in the payment of ordinary living expenses or the acquisition of replacement assets available for distribution to Maria and Antonio. I would not make either declaration. Immacolata is free during her lifetime to dispose of the properties and deal with the proceeds of sale as she sees fit providing that she does not make any gift, settlement or transaction that is calculated to defeat the intention of the mutual wills agreement and is of a testamentary nature.
For the same reasons I would not grant any injunction restraining Immacolata from disposing, selling, transferring, charging or mortgaging the properties without Maria's written consent.
Maria seeks an order setting aside the transactions by which Immacolata gifted 53 Osborne Place and transferred it to herself and Antonio as trustees for the A Cosentino Family Trust. Maria also seeks an order requiring Immacolata and Antonio to execute all necessary documents to make Immacolata the sole registered proprietor of 53 Osborne Place and an injunction restraining Immacolata and Antonio from disposing, selling, transferring, charging or mortgaging 53 Osborne Place without Maria's written consent. I decline to make any of those orders. For the reasons I have stated Immacolata's gift of 53 Osborne Place to the trustees for the A Cosentino Family Trust and the transfer of the property to the trustees is not a breach of the mutual wills agreement.
Finally, Maria claims damages under s 25(10) of the Supreme Court Act 1935 (WA). I have found that Immacolata did not breach the mutual wills agreement by transferring 53 Osborne Place to the trustees for the A Cosentino Family Trust. I have declined to grant an injunction restraining Immacolata and Antonio from dealing with 53 Osborne Place. Accordingly, it is not appropriate to award damages either in addition to or in substitution for the injunctions claimed by Maria.
Immacolata breached the mutual wills agreement by revoking her 1997 will. However, Maria has not sought damages resulting from that breach as distinct from the transfer of 53 Osborne Place to the trustees for the A Cosentino Family Trust.
The plaintiffs' application should be dismissed.