Hardy v Whitcombe
[2017] NZHC 2382
•30 October 2017
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2017-412-000047 [2017] NZHC 2382
IN THE MATTER of the estate of RICHARD ANTHONY
REID
BETWEEN
RICHARD MATHESON HARDY AND OTHERS
Plaintiffs
AND
TODD WHITCOMBE Defendant
Hearing: 11 October 2017 Appearances:
R Butler for Plaintiffs/Respondents
C S Withnall QC for Defendant/ApplicantJudgment:
30 October 2017
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
[on defendantʼs summary judgment application]
Introduction
[1] In 1960 Grace and Richard Reid (Richard was more commonly known as
“Dick”) were married, the third marriage for her and the first for him.
[2] In 1968 they executed wills whose provisions mirrored one another, leaving everything to the survivor with no gift over.
HARDY v WHITCOMBE [2017] NZHC 2382 [30 October 2017]
[3] In 1995 Grace died and Dick took under her 1968 will. He took also their principal (jointly owned) asset, their house, by survivorship.
[4] Thereafter Dick made a number of wills, initially making some provision for Grace’s grandchildren (through an earlier marriage) but later making no such provision. His last will was dated 14 July 2008.
[5] Dick died in June 2016 and his 2008 will has since been probated.
This proceeding
The original statement of claim
[6] Richard Hardy (“Richard”) was Grace’s only child. He has three children who are Grace’s only grandchildren. In this proceeding he sued Todd Whitcombe, the executor of Richard’s estate. He sued on a single cause of action under the equitable doctrine of mutual wills. The primary relief he sought was:
…a declaration that the will dated 14 July 2008 is invalid.
[7] By his statement of claim he set out the family background and the making of wills in 1968.
[8] He then pleaded:
(11) Before they executed the Wills dated 10 May 1968, both the Testator and Mrs Reid agreed that whomever of them died first would hold their property, including the relationship property, on trust for the plaintiff and the plaintiff’s children, Fiona, Tim and Philip.
(12) The wills made by the Testator and Mrs Reid on 10 May 1968 were mutual wills.
(13) In the event of their deaths, both the Testator and Mrs Reid agreed to dispose of their property including their relationship property, to each other in their mutual wills.
(14) Prior to executing their mutual wills, both the Testator and Mrs Reid promised not to evoke their respective wills in a manner that was inconsistent with their mutual wills.
(15) The Testator’s will of 14 July 2008 is inconsistent with the terms of
the Testator’s mutual will, dated 10 May 1968, and his execution
was a breach of the promise the Testator made to Mrs Reid in terms of paragraphs 13 and 14 above.
The second statement of claim
[9] After counsel for the executor filed his submissions for this hearing, an amended statement of claim was filed by Richard. It introduced a new cause of action and sought different relief.
[10] The first cause of action remained based on the doctrine of mutual wills. The central allegations were reproduced from the original paragraphs 11 to 15.
[11] Richard, as a second cause of action, sued for breach of a secret trust, alleging:
(16) Mrs Reid communicated to the Testator a clear and binding intention that:
(a) her small residuary estate was to be held on trust by the Testator, for the benefit of the plaintiff and his children, until the Testator died; and
(b) after he died the Testator would make provisions for the
plaintiff and his children, from Mrs Reid’s residual estate.
(17) The Testator understood and accepted Mrs Reid’s testamentary
intention as outlined in paragraph 16 above.
[12] The primary relief now sought on both causes of action was:
A declaration that the defendant holds half of the testator’s estate on trust for
the plaintiff and the plaintiff ’s children.
[13] The relief specified in the second statement of claim is similar but not identical to the second ground contained in Richard’s notice of opposition which he had filed in the meantime. In that ground he stated:
b)Prior to the execution of their respective wills on 10 May 1968, Mrs Reid and the Testator agreed that whomever of them died first would hold their property, including their relationship property, on trust for the plaintiff and the plaintiff’s children, Fiona, Tim and Philip.
The third statement of claim
[14] On the eve of this hearing, a second amended statement of claim was forwarded to the Court.
[15] The plaintiff’s solicitor now acts for not only Richard Hardy but also his three children, Fiona Jane Hardy, Timothy Gordon Hardy and Philip John Hardy. In the submitted document, all four are named as plaintiffs.
[16] The pleading is otherwise materially the same as that in the first amendment.
Procedural defects
[17] At the beginning of the hearing counsel addressed me on the procedural defects associated with the second amended statement of claim. It had not been formally filed. Nor had leave been granted to join the additional plaintiffs. It had nevertheless been agreed between counsel, subject to the Court’s direction, that it was in the interests of all involved that the defendant’s summary judgment application proceed in relation to the third statement of claim.
[18] The first two orders at the conclusion of this judgment cure the procedural defects pursuant to r 1.9 High Court Rules.
Executor’s summary judgment application
The application
[19] The executor applies, as defendant, for summary judgment. The application is made pursuant to r 12.2(2) High Court Rules which provides:
12.2Judgment when there is no defence or when no cause of action can succeed
…
(2) The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
Defendant’s summary judgment application – the principles
[20] I summarise the general principles which I adopt in relation to the application:
(a) The onus is on the defendant seeking summary judgment to show that none of the plaintiffs’ causes of action can succeed. The Court must be left without any real doubt or uncertainty on the matter.
(b)The Court will not hesitate to decide questions of law where appropriate.
(c) The Court will not attempt to resolve genuine conflicts of evidence or to assess the credibility of statements and affidavits.
(d)In determining whether there is a genuine and relevant conflict of facts, the Court is entitled to examine and reject spurious defences or plainly contrived factual conflicts. It is not required to accept uncritically every statement put before it, however equivocal, imprecise, inconsistent with undisputed contemporary documents or other statements, or inherently improbable.
(e) In weighing these matters, the Court will take a robust approach and enter judgment even where there may be differences on certain factual matters if the lack of a tenable defence is plain on the material before the Court.
(f) Once the Court is satisfied that there is no defence, the Court retains a discretion to refuse summary judgment but does so in the context of the general purpose of the High Court Rules which provide for the just, speedy and inexpensive determination of proceedings.
[21] Pursuant to r 12.4(5)(c) High Court Rules, a defendant who files an application for summary judgment must file an affidavit which shows why none of the causes of action in the plaintiffs’ statement of claim can succeed.
Mutual wills
The common law doctrine
[22] The plaintiffs invoke the common law doctrine of mutual wills.1
The requirements of the doctrine
[23] Counsel did not express any disagreement as to the requirements of the doctrine. They are settled and reflected in a number of New Zealand judgments including that of Hammond J in Re Newey (dec’d)2 and the Court of Appeal in Lewis
v Cotton.3 In Lewis v Cotton, the Court of Appeal, in considering the doctrine of
mutual wills, recognised that the executors and trustees of any replacement will may be required to hold affected assets upon a constructive trust in terms of the revoked will.4 Blanchard J, delivering the judgment of the Court, referred to and adopted
dicta from leading decisions in other Commonwealth jurisdictions.5
[24] In Wilson v Saunders I summarised the requirements in relation to the doctrine based on the judgment in Lewis v Cotton. I adopt what I there said:6
[8] … From Lewis v Cotton, and the authorities there referred to, the imposition of a constructive trust based on mutual wills has two fundamental requirements:
(a) There was an underlying consultation and coordination between two testators which resulted in an agreement or an arrangement as to how they would make their respective wills (which were then made).7 I will refer to this as the requirement for “corresponding wills”. Reference is sometimes made to “mirror wills” and, more ambiguously and confusingly, to “mutual wills”.
(b) There must have been a contract or mutual understanding (intended to bind each testator to a future course of action) that neither testator
1 The provisions in s 30 Wills Act 2007 concerning mutual wills do not apply to Richard’s will as
it was made before1 November 2007 – s 40(2)(r) Wills Act 2007.
2 Re Newey (dec’d) [1994] 2 NZLR 590 (HC).
3 Lewis v Cotton [2001] 2 NZLR 21 (CA).
4 Lewis v Cotton, above n 3, at [42].
5 In particular, Gray v Perpetual Trustee Co Ltd [1928] AC 391, [1928] All ER 758 (PC); Re
Cleaver, Cleaver v Insley [1981] 1WLR 939, [1981] 2 All ER 1018; Re Goodchild, Goodchild v
Goodchild [1997] 1 WLR 1216; [1997] 3 All ER 63 (CA); Birmingham v Renfrew (1937) 57
CLR 666, [1937] ALR 520 (HCA). A helpful list of principles is also to be found in Charles vFraser [2010] EWHC 2154 (Ch).
6 Wilson v Saunders [2016] NZHC 1211, (2016) 17 NZCPR 404 at [8]–[9].
7 Lewis v Cotton, above n 3, at [46].
would revoke the will provision or deal with the property in a manner inconsistent with the provisions of the corresponding wills.8
[9] In addition to the above two requirements, there are requirements of proof and of evidence. The mutual understanding of the two testators:
(a) must be sufficiently certain in its terms that the Court can enforce the terms;9
(b) may be oral or in writing and may be contained in the wills themselves or proved by extraneous evidence,10 and may be proved either by express agreement or by conduct, such that that the mutual understanding may be implied;11
(c) does not require consideration in the usual sense;12
(d) is not established by the mere fact that the testators made corresponding wills;13 and
(e) is to be established on the ordinary civil standard (balance of probabilities) but is to be scrutinised, as a claim over the property of a deceased person, with very great care.14
What the plaintiffs say
[25] The material allegations in the statement of claim relating to mutual wills are set out above at [8]. The plaintiffs’ main evidence, especially in relation to matters relating to Grace’s and Dick’s wills, was provided by Richard. Richard is now 82 years of age. At the time he swore his affidavit, he had recently been diagnosed with a serious illness and has a poor prognosis. In swearing his affidavit, he deposed that he was conscious that he may not be able to give oral evidence in this proceeding and that his affidavit needed to be as candid and complete as possible.
[26] Richard then set out the matters of family background. He was Grace’s only child, having been the son of her first marriage. Grace married Dick, her third husband, in 1960. At that point, Grace and Dick were respectively 50 years and 48 years of age. It was Dick’s first marriage. He had no children and Richard (26 years
of age when Grace and Dick married) became his only step-child.
8 Lewis v Cotton, above n 3, at [43], [46].
9 Lewis v Cotton, above n 3, at [52]; In re Oldham; Hadwen v Myles [1925] Ch 75 (Ch).
10 Lewis v Cotton, above n 3, at [45].
11 At [23]–[30]; Birmingham v Renfrew, above n 5, at 682–683 per Dixon J.
12 Lewis v Cotton, above n 3, at [45].
13 At [46]; Gray v Perpetual Trustee Co Ltd, above n 5, at 400.
14 Lewis v Cotton, above n 3, at [50]; Re Cleaver, Cleaver v Insley, above n 5, at 947.
[27] Grace came into her marriage with Dick with a favourable share of proceeds from the sale of previous matrimonial property, which were in turn used to acquire a home with Dick. She also brought to the marriage a crib at Alexandra which was used for family holidays and was subsequently sold in the early 1980’s for approximately $30,000.
[28] Grace and Dick had an extremely happy and close marriage, Grace being the more social and Dick being quiet and reserved.
[29] The couple had a series of homes in the St Clair area of Dunedin and lived in their last home in Wycolla Avenue from 1979.
[30] Grace owned a hair salon and subsequently a baby wear shop. She retired from work in the 1980’s due to ill-health which was followed by blindness. She died of cancer at 85.
[31] Dick was employed as a tool-maker into his 70’s.
[32] Richard lived with his family in Auckland during the years of Grace’s and Dick’s marriage. He was able to regularly stay with the couple through work travel and Grace and Dick also visited in Auckland. The grandchildren shared a close relationship with both Grace and Dick, with Dick also being regarded as their grandparent.
[33] One of the grandchildren, Fiona Hardy (now 56 years of age), has provided a detailed affidavit of her close relationship with her grandparents, including with Dick alone after Grace had died.
[34] In 2008, the Wycolla Avenue property was sold. Richard deposes that its rating valuation at the time was $390,000 whereas it was sold to a distant relative (on Dick’s side) for $210,000. Richard deposes that “selling below value was not like Dick at all”.
[35] Dick lived until 103 years of age. He had moved into a nursing home some eight years before his death. During those later years, Richard and his wife had
experiences of Dick as a person who could become upset, confused and disorientated.
The will history
[36] The wills which the plaintiffs assert to have been mutual wills were executed on 10 May 1968. They are simple documents. Grace and Dick each left to the other their estates, with no gift over. In terms of each will, the executors were to hold the estate:
UPON TRUST for my said wife/husband for her/his own use absolutely.
[37] After Grace’s death, Dick made four further wills:
(a) 13 June 1995 – this will specifically gifted dwelling contents to Fiona and Tim. It then required the residue to be divided into 10 equal parts. Fiona and Philip were to receive one part each and Tim to receive two parts.
(b)4 February 2004 – the contents of the dwelling were now specifically gifted to Dick’s brother, Albert, with modest other gifts to three charities. The residue was then to be divided into 10 equal parts with one part each to Fiona, Tim and Philip.
(c) 13 October 2005 – the structure of specific gifts remained as in the
2004 will with the provision for Fiona, Tim and Philip identical (but with a niece of Dick (Anne Reid) now substituted as a residuary beneficiary for a one-tenth share of residue).
(d)23 March 2006 – the specific gifts remained as in the 2005 will. The division of the residuary estate was substantially altered. Dick’s brother, Albert, and his niece share equally in the residuary estate. Fiona, Tim and Philip (and some other previously named beneficiaries) no longer receive a share of residue.
(e) 14 July 2008 – by this final will, Dick substituted Todd Whitcombe as one of his executors in place of his previous solicitor. Provision made under the will duplicated that of the 2006 will.
[38] For the plaintiffs, Mr Butler identified the evidence in three particular areas as supporting the existence of a mutual wills agreement:
(a) Richard’s evidence of an agreement between Dick, Grace and himself that the three grandchildren would be looked after;
(b) Grace’s conduct both in executing the 1986 will and in “honouring her
promise not to revoke it before her death”; and
(c) the contents of the subsequent wills of 1995, 2004 and 2005 which made provision for the grandchildren.
Analysis – Richard’s evidence of an agreement
[39] The point in Richard’s affidavit at which he first deals with discussions between himself, Grace and Dick is when he comes to discuss the 1995 will. His evidence is this:
The 1995 Will
49.This will is annexed to this affidavit and marked “E”. Dick would have been 82 old at the time of this will. At the time of this will, Grace had already passed away (in May that year). She had been unwell for at least 20 years. I had a heart condition and was unwell. I had heart surgery and a stent inserted. There had always been an agreement, between Dick, Grace and me that the grandchildren were to be looked after. My unwellness coupled with Dick’s fear of tax/death duties also meant this will was written in a way that suited all parties.
50. The 1995 will was in accordance with conversations had in the early
1990s between myself, Grace and Dick regarding inheritance and testamentary wishes. This Will was shown to me confirming that
Dick, being the inheritor of Grace's estate, intended to honor the
agreement between him and Grace that their grandchildren be
“looked after”. The discussions and decisions took into account that I had received some inheritance from my biological father, Richard Hardy, and so Grace, Dick and I agreed that Dick’s estate should pass to the grandchildren (Fiona, Tim and Phillip).
51.Dick was supportive of providing for his grandchildren. I remember this conversation and promise clearly. During the early 2000s Dick showed me his will when I was visiting him at Wycolla Ave.
[40] Richard then identifies and discusses Dick’s subsequent wills but does not depose to having had any discussion with Dick in relation to those wills. From other parts of his evidence, it is apparent that he was shown only the 1995 will and not the subsequent wills.
[41] Richard concludes his affidavit with two further paragraphs relevant to the intention of Dick and Grace:
70.It is my belief that when Dick and Grace made mirror wills in 1968, it was their clear mutual intention that whomever passed away first, would leave their estate to the surviving spouse. Grace brought quite a bit of money into the relationship, which was unusual for a woman at that time. That capital was used by them both to acquire properties in St Clair and my mother had the crib in Alexandra.
71.As they got older, their estates were discussed, but not frequently or in great detail. They were private people with simple affairs. However, I was present at one of the discussions they did have and it was clearly agreed that if Grace died first, Dick would look after his grandchildren. Initially he honoured this. But, as time went on this promise to Grace seems to have been overlooked.
[42] From this evidence, the plaintiffs’ case as to Dick’s and Grace’s agreement at
its highest is:
(a) There had always been an agreement between Dick, Grace and
Richard that the grandchildren were to be looked after (paragraph 49);
(b)Richard was present at one conversation when Dick agreed that, if Grace died first, he would look after the grandchildren (paragraph 71); and
(c) Richard had “conversations” with Dick and Grace in the early 1990’s regarding inheritance and testamentary wishes with which Dick’s
1995 will accorded (paragraph 50).
[43] There is no evidence (despite pleadings, relief sought or other suggestions) to support the existence of:
(a) an express commitment that the survivor of Grace and Dick would hold their relationship property on trust for Richard and his children;
(b)an express commitment by the survivor to leave half their estate to the grandchildren; or
(c) an express promise not to revoke the 1968 wills in a manner inconsistent with the “mutual wills” and the agreement to look after the grandchildren.
[44] The plaintiffs’ case as to the intention of Grace and Dick to have a mutual wills arrangement is based on the evidence as I have summarised it. It is not open to speculate that more evidence might emerge in the context of a trial. Dick and Grace are both dead. To the extent Richard relies on discussions in which he was involved, he has set those out in his affidavit, expressly conscious as to the need to be as candid and complete as possible.
[45] The plaintiffs have not taken the step of verifying the allegations in the statements of claim as a plaintiff seeking summary judgment would have to. There is a central allegation in the statement of claim that:
Prior to executing their mutual wills, both the Testator and Mrs Reid promised not to revoke their respective wills in a manner that was inconsistent with their mutual wills.
That statement remains unverified. Richard does not depose to any involvement in such a discussion as to non-revocation of wills. There is accordingly no direct evidence of such a promise. The plaintiffs’ case in this regard turns on whether the Court finds there to be an arguable inference that such a mutual promise of non- revocation was made. I now turn to that issue of non-revocation.
Analysis – evidence of Grace’s conduct
[46] The evidence is that Grace did not revoke her 1968 will – it become on death her effective will.
[47] Mr Butler submitted that Grace’s conduct both in executing the 1985 will and in “honouring her promise not to revoke it before her death” evidence the existence of mutual wills.
[48] I first consider the nature of the 1986 wills. The fact that Grace and Dick may be expected to have discussed beforehand their 1986 wills and agreed to proceed to make them in a particular way does not constitute the 1986 documents mutual wills.15 As the Court of Appeal observed in Lewis v Cotton, “Such an agreement does not restrain the right to revoke”.16
[49] Equally, the fact that Grace did not revoke her 1986 will once it was in place does not constitute evidence that there had been a mutual commitment not to revoke the wills.
Analysis – the contents of Dick’s subsequent wills (1995 to 2005) with provision for
the grandchildren
[50] Richard’s evidence is that:
(a) Dick showed him his 1995 wills in the early 2000’s;
(b) Richard viewed Dick’s 1995 will as an “honouring” of Grace and
Dick’s agreement;
(c) Richard views Dick as having, through the 2004 and 2005 wills
(which he has seen since Dick’s death), “continued his wish to look after his grandchildren”; and
15 Lewis v Cotton, above n 3, at [46].
16 At [46], citing Gray v Perpetual Trustee Co Ltd, above n 5, at 400.
(d)Richard is of the view that, as time went on (by inference from 2005), Dick seems to have overlooked his promise to look after the grandchildren.
[51] It is plainly arguable that Dick may have showed Richard his 1995 will in an endeavour to demonstrate to Richard that the three grandchildren were being “looked after” through Dick’s will. It is also plain that the provision in the subsequent wills of 2004 and 2005 similarly “looked after” the grandchildren.
[52] Such provision was, however, entirely consistent with an arrangement which fell short of commitment to an irrevocable degree of provision. The initial pattern of Dick’s will-making, after Grace’s death, cannot of itself be taken as evidence of a commitment to non-revocation.
Standing back – conclusion on the application of the mutual wills doctrine
[53] The plaintiffs have not pointed to evidence which indicates even arguably that Grace and Dick reached a mutual understanding (intended to bind one another) that neither would revoke their will provisions or deal with the property of the survivor in a manner inconsistent with the provisions of the corresponding wills.
[54] That is sufficient to dispose of the plaintiffs’ case.
[55] Beyond that, there is a fundamental, conceptual difficulty in the plaintiffs’ case. The doctrine of mutual wills assumes that each will makes provision for an intended other beneficiary beyond the other spouse, usually with the surviving spouse taking first, but with gift-over provisions for the intended other beneficiary. Mr Butler did not refer me to a case in which the allegedly mutual wills involved (as here) outright bequests to the surviving spouse, without a gift over. The plaintiffs assert that there was a promise involving non-revocation of the 1986 wills. But had Dick, as surviving spouse, not revoked his 1986 will after Grace’s death, the outcome would have been an intestacy with no right of inheritance for Fiona, Tim or Philip.
[56] The plaintiffs sought to meet this difficulty by noting that the alleged non- revocation promise was a promise not to revoke the 1986 will in a manner inconsistent with the mutual wills. But, as seen, the 1986 wills involve outright bequests one to the other. Dick’s changing will provisions from 1995 are not inconsistent with the 1986 wills precisely because Grace had left everything to him for his own use absolutely.
[57] I have dealt with the non-revocation promise in the way it was framed by the plaintiffs. An alternative scenario – not put as part of their case – might have been a promise that if the survivor later revoked the 1986 will, their promise was to put in place a will which looked after the grandchildren. But such a promise would not come within the doctrine of mutual wills. It would essentially be a promise as to future testamentary provision (that is, through an entirely new and different will).
[58] Conceptually, the asserted promises between Grace and Dick are not commitments which would render any subsequent wills mutual. The plaintiffs’ assertion of the concept of the doctrine of mutual wills fails on this point.
Secret trust
The equitable concept
[59] The plaintiffs, in the alternative, assert that a portion of Dick’s estate is held pursuant to a secret trust.
The requirements of a secret trust
[60] The elements required to establish a secret trust were stated by Viscount
Sumner in Blackwell v Blackwell:17
The necessary elements on which the question turns are intention, communication, and acquiescence. The testator intends his absolute gift to be employed as he and not as the donee desires; he tells the proposed donee of this intention and, either by express promise or by the tacit promise, which is signified by acquiescence, the proposed donee encourages him to bequeath the money in the faith that his intentions will be carried out.
17 Blackwell v Blackwell [1929] AC 318 at 334.
[61] In Brown v Pourau, Hammond J elaborated upon the three elements of intention, communication, and acquiescence.18 I adopt these observations:
· As to the intention, a binding obligation must be intended, that is a trust in the legal sense of that term.19
· The communication may occur before or after the date of the testator’s will.20 It is sufficient that the communication occurs during the lifetime of the testator.
· The devisee’s acquiescence may be established through express acceptance or (in an appropriate case) spelled out of the silence of the devisee.21
[62] The claimant must establish that the donor intended to create a binding obligation. In Brown v Pourau,22 Hammond J adopted the analysis of Sir Robert Megarry VC in Re Snowdon (dec’d).23 In Brown v Pourau, the Court found that the claimant had not established that there was an intention on the part of the donor to create a trust binding in law. Adopting the terminology of Sir Robert Megarry,
Hammond J found no clear evidence that the donee had accepted an obligation as a trustee subject “to the sanction of this Court”.24 Hammond J had earlier referred to Sir Robert Megarry’s more extended observation:25
I cannot see any real evidence that she intended the sanction [in this case] to be the authority of a court of justice and not merely the conscience of her brother [who had accepted] … a mere moral or family obligation.
[63] In Re Cleaver, Cleaver v Insley, Nourse J recognised the relationship between mutual wills and secret trusts. By reference to the decision of the High Court of
Australia in Birmingham v Renfrew, Nourse J, in Re Cleaver, observed:26
18 Brown v Pourau [1995] 1 NZLR 352 (HC) at 367.
19 Brown v Pourau, above n 18, at 367.
20 French v French [1902] 1 IR 172 at 230; adopted in Brown v Pourau, above n 18, at 366 – 367.
21 Brown v Pourau, above n 18, at 367.
22 Brown v Pourau, above n 18, at 368–373.
23 Re Snowdon (dec'd) [1979] Ch 528.
24 Brown v Pourau, above n 18, at 373.
25 Re Snowdon (dec'd), above n 23, at 539 and 534.
26 Re Cleaver, Cleaver v Insley, above n 5, at 947.
… these cases of mutual wills are only one example of a wider category of cases, for example secret trusts, in which a Court of equity will intervene to impose a constructive trust… The principle of all these cases is that a court of equity will not permit a person to whom property is transferred by way of gift, but on the faith of an agreement or clear understanding that it is to be dealt with in a particular way for the benefit of the third person, to deal with that property inconsistently with that agreement or understanding.
[64] A secret trust, as with mutual wills, must be established on the ordinary civil standard (balance of probabilities) but the allegation is to be scrutinised, as a claim over the property of a deceased person, with very great care.27
The plaintiffs’ claim based on a secret trust
[65] For evidence of a secret trust, the plaintiffs rely on precisely the material relied upon in relation to their mutual wills cause of action.
[66] Mr Butler emphasised that the required communication of a secret trust may occur after a will is executed. Inasmuch as the plaintiffs rely upon Grace’s communications to Dick after 1986, Richard deposing to “conversations in the early-
1990’s, Mr Butler invites the Court to find arguable the creation of a secret trust even if rejecting the existence of mutual wills.
Submissions
[67] For the plaintiffs, Mr Butler sought to frame the requirements of a secret trust in a particular way. He stated that the testator must agree with, or communicate to, the recipient that their property is to be passed on in a certain way or to a certain beneficiary or class.
[68] Mr Butler addressed the three-fold requirements of intention, communication and acquiescence.
[69] In relation to the element of intention, Mr Butler’s submission was:
“intention”: There is evidence that Mr and Mrs Reid discussed providing for the Hardy Family. It is reasonable to suppose that the parties intended those
27 See discussion above at [24]. See also, Andrew Butler (ed) Equity and Trusts in New Zealand
(2nd ed, Thomson Reuters, Wellington, 2009) at [14.1.5].
discussions to be binding. Mrs Reid refrained from changing her will as a result; Mr Reid did change his will after Mrs Reid died in a manner that is consistent with their intention. The alternative is that these discussions created little more than a moral obligation and that Dick was able to enjoy the benefits of Grace’s estate during his lifetime, without providing for her family when he passed. It is unlikely that such an outcome was intended;
Discussion
[70] At trial, it would be for the plaintiffs to establish on the balance of probabilities that a secret trust existed. To succeed, they would need to establish each of the elements including intention.
[71] All the relevant evidence in that regard has been produced on the present application. I have already observed, in relation to the mutual wills cause of action, the absence of evidence of a mutual commitment not to revoke the 1986 wills.
[72] There is similarly an absence of evidence of the relevant intention in relation to the secret trust cause of action. The dichotomy is between the acceptance of an (enforceable) trust obligation and the acceptance of a “mere moral or family obligation”. The terminology of Grace and Dick, carefully quoted on more than one occasion by Richard in his affidavit, is of “looking after” the grandchildren. At another point, Richard refers to Dick as having been “supportive of providing for his grandchildren”, a conversation which he remembers clearly.
[73] The evidence is entirely equivocal as to whether Dick and Grace were assuming merely moral or family obligations or were assuming trust obligations which were intended to be subject to the sanction of a court. Language which is couched in terms as general as “looking after the grandchildren” is as least as if not more suggestive of moral or family obligation than it is of enforceable trust obligation.
[74] I am satisfied that the evidence available to the plaintiffs will not enable them to satisfy the required standard of proof. They would not be able to establish at trial an intention to create a secret trust which was intended to be binding in law, in the sense that a court would be able to enforce it.
[75] The plaintiffs’ assertion of a secret trust must fail through an inability to establish the required element of intention.
Costs
[76] As the defendant has been successful, costs must follow the event. My preliminary view is that costs would appropriately be assessed on a 2B basis. I will reserve the quantum of costs with memoranda to be filed within 10 working days if there is disagreement.
Orders
[77] I order:
(a) Fiona Jane Hardy, Timothy Gordon Hardy and Philip John Hardy are joined as plaintiffs.
(b)Any need to refile the second amended statement of claim is dispensed with and the second amended statement of claim, as filed, shall be treated as validly filed.
(c) There is judgment for the defendant on the plaintiffs’ claims.
(d)The plaintiffs are to pay the costs and disbursements of the defendant, with the quantum of costs and disbursements reserved.
Associate Judge Osborne
Solicitors:
Ross Holmes Lawyers, Auckland
Counsel: R Butler, Auckland
O’Neill Deveraux, Dunedin
Counsel: C S Withnall QC, Dunedin
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