McNeish v McArthur

[2019] NZHC 3281

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IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-000789

[2019] NZHC 3281

UNDER

Part 18 of the High Court Rules 2016

IN THE MATTER

of the Estate of Ian James McArthur

BETWEEN

DARYL WARREN McNEISH and JOANNE MARIE McNEISH

Plaintiffs

AND

JAMES McARTHUR

Defendant

Hearing:

2 and 3 December 2019

Appearances:

D J Ballantyne and C J Cousins for the Plaintiffs

S D Campbell and J J Anson-Holland for the Defendant

Judgment:

12 December 2019

JUDGMENT OF DOOGUE J

Introduction

[1]    Ian and Lorraine McArthur married in 1984. They had both been married before and had children to their previous partners.

[2]This proceeding concerns the validity of Ian’s will, dated 5 March 2013.

[3]    The plaintiffs, Daryl and Joanne McNeish (Lorraine’s children), seek a declaration that Ian’s will is in breach of mutual wills made by Ian and Lorraine on 18 December 2002. They therefore seek for Ian’s estate (the Estate) to meet his obligations under that earlier (and now revoked) will. The defendant, James McArthur

McNEISH v McARTHUR [2019] NZHC 3281 [12 December 2019]

(Ian’s son), is Ian’s oldest son and the sole executor of the Estate. He has five siblings: Jennifer McArthur, Andrew McArthur, Joseph McArthur, John McArthur and Yvonne McArthur.

Background

[4]    Ian and Lorraine’s first known wills are those signed and executed on 15 May 1994 (First Wills). The effect of the First Wills was that in the event of Ian’s death, the Estate would pass to Lorraine and vice versa. But if either Ian or Lorraine was not survived by the other, their estate would pass in equal shares to their respective children. The First Wills were materially identical except for a provision in Lorraine’s will stating that if she was not survived by Ian, her rocking chair, her grandmother’s dishes and cake plates and her personal jewellery would all pass to her daughter Joanne McNeish before her residual estate was to be evenly distributed to her children and Ian’s children.

[5]    In December 2002, Ian and Lorraine instructed their solicitors to prepare new wills for them. Two materially-identical wills were prepared leaving, amongst other things, their respective estates to the survivor of them or, in the event the other did not survive them,  a  one-half  share  of  their  estate  to  their  respective  children.  On 18 December 2002, Lorraine executed a will to this effect (Lorraine’s Will) and Ian did the same (Second Will).

[6]    In July 2003, Lorraine was diagnosed with metastatic ovarian cancer. As a result, sometime later in 2004 she and Ian decided to move from Reefton on the west coast of the South Island to Brisbane, Australia to be close to Lorraine’s children and grandchildren. Lorraine and Ian gave Lorraine’s son Daryl instructions to purchase a home for them in Brisbane and provided him with a significant sum of money as a deposit on any property he chose to purchase for them. They did this in the context of telling Lorraine’s children that her condition was terminal and that she and Ian had signed identical wills (that is, Lorraine’s Will and the Second Will) providing for their respective children. This occurred in October 2004.

[7]    Lorraine and Ian sold up and moved to Brisbane in January 2005. The couple lived there until Lorraine’s death on 23 December 2005.

[8]    Lorraine died without revoking her will. Probate of Lorraine’s Will was granted on 8 February 2006 and in accordance with that will, Ian was appointed executor of her estate. Lorraine’s children did not contest the will relying on their belief that Ian would ultimately provide for them in the spirit of their mother’s will.

[9]    Ian immediately demanded the deposit monies back from Daryl following Lorraine’s death. As a result, the relationships between the families became strained and Lorraine’s children had little to do with Ian between Lorraine’s death and his.

[10]   Following Lorraine’s death, Ian executed two further wills. The first, dated 5 September 2006 (Third Will), followed Ian’s purchase of a property at 4 Dunns Avenue, Pines Beach, Christchurch (Pines Beach Property) on 8 June 2006. The Third Will left the Pines Beach Property to Ian’s granddaughter, Angela McArthur, and to his step-grandson, Dylan McNeish. It also left Ian’s residual Estate equally to his children and Lorraine’s children. The second, dated 5 March 2013 (Fourth Will), appeared to follow two significant events: the Christchurch earthquake in 2011 which led to Ian moving to Blenheim and subsequently purchasing a property at 9A Turner Place, Blenheim (Blenheim Property) on 28 October 2011. The Fourth Will, which revoked any will before it, appointed Ian’s son as executor of the Estate and left the Estate equally to Ian’s children, or to his grandchildren in the event his children did not survive him.

[11]   The Fourth Will made no bequests to Lorraine’s children. The only mention of either of Lorraine’s children was in respect of any debt owed by Joanne to Ian at the time of his death, which was forgiven absolutely.

[12]   Ian died on or about 7 March 2018. In accordance with the Fourth Will, Ian’s son was appointed executor of the Estate. Probate of the Fourth Will was granted on 16 May 2018.

[13]   Lorraine’s children (Daryl in particular) expected that Ian would not have revoked the Second Will and that Daryl, along with Ian’s son, would have been co- executors and the Estate administered in accordance with the terms of the Second Will.

Lorraine’s children’s claim

[14]   Lorraine’s children claim that Lorraine’s Will and the Second Will gave effect to an oral agreement between Ian and Lorraine that they would:

(a)leave their estates to the survivor of them and then equally as to one- half share between their respective children; and

(b)not revoke their wills so as to provide for their respective children.

[15]   Lorraine’s children claim that Lorraine’s Will and the Second Will are mutual wills. They say that given Lorraine did not revoke her will prior to her death, Ian’s Fourth Will is in breach of his promise not to revoke the Second Will.

[16]   The foundation for their claim is an alleged promise made by Ian to Daryl in May 2006 where Ian stated, “I will honour your mother’s wishes”. This, Lorraine’s children claim, was a reference to the discussion that Ian and Lorraine had with them while they were visiting the couple in Reefton in October 2004.

Mutual wills – legal principles

[17]   Section 30 of the Wills Act 2007 has codified the equitable doctrine of mutual wills. However, Lorraine’s Will and the Second Will were  executed  before  the Wills Act 2007 came into force.1 This case is therefore to be determined by applying the equitable doctrine of mutual wills as set out in Lewis v Cotton.2 In that case, the Court of Appeal observed that while a will can always be revoked, where non- revocation has been contractually promised, 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.3 The origin of this doctrine is in cases of joint wills, that is, a will signed by two testators. Such a document would ordinarily be read as two wills with the mutual intention that neither should be revoked.4

1      Accordingly, s 30 does not apply in this instance by virtue of s 40(2)(r) of the Wills Act 2007.

2      Lewis v Cotton [2001] 2 NZLR 21 (CA).

3 At [42].

4 At [41].

[18]   The relevant promise for the purposes of the doctrine of mutual wills may be either to not revoke a will at any time whether secretly or openly, or to not revoke a will secretly during the other will maker’s lifetime and to not revoke it at all after the other will maker’s death.5 However, the crux of the matter is not the non-revocation promise but rather the obligation to not deal with property contrary to the agreement or understanding.6

[19]   The Court of Appeal in Lewis v Cotton held that the courts are “very slow” to find mutual wills simply because two parties have made corresponding or mirror wills.7 More is needed to satisfy the doctrine. In Wilson v Saunders, Associate Judge Osborne (as he then was) summarised the requirements in respect of the doctrine of mutual wills as follows (footnotes omitted):8

[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). 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 cause of action) that neither testator would revoke the will provision or deal with the property in a manner inconsistent with the provisions of the corresponding wills.

[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;

(b)may be oral or in writing and may be contained in the wills themselves or proved by extraneous evidence, and may be proved either by express agreement or by conduct, such that that the mutual understanding may be implied;

(c)does not require consideration in the usual sense;

5 At [43].

6 At [43].

7 At [49].

8      Wilson v Saunders [2016] NZHC 1211, (2016) 17 NZCPR 404 at [8]-[9].

(d)is not established by the mere fact that the testators made corresponding wills; 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.

[20]   Further, the Supreme Court of Victoria held in Flocas v Carlson that the mere fact two wills with corresponding obligations were entered into at the same time, prepared by the same lawyers and witnessed by the same people, is not, of itself, sufficient proof to establish an intention to be bound.9 McMillan J went on to say:10

Persons in receipt of legal advice are presumed to know or have been told that wills are revocable instruments. Nevertheless, the general rule may be displaced where there is other evidence that the parties intended to come to a binding agreement.

[21]   The time between an alleged agreement and the time it falls to be proved will often result in difficulty providing any reliable evidence that the parties intended to come to a binding agreement.

[22]   Notwithstanding the above, a relevant agreement may be implied or inferred through:11

the process of drawing reasonable and probable inferences from other facts, such as primary facts specifically found, undisputed events and uncontroversial circumstances surrounding them.

[23]   The evidence that supports any implied or inferred agreement must be “certain and unequivocal”,12 “clear and satisfactory”,13 or “much more than … slender”14 to satisfy this Court that, on the balance of probabilities, such an agreement was made.15

9      Flocas v Carlson [2015] VSC 221 at [186].

10 At [186].

11 Fry v Densham-Smith [2010] EWCA Civ 1410, [2011] WTLR 387 at [33]. See also Re Newey [1994] 2 NZLR 590 (HC) at 595 which held that “[a]ll the surrounding circumstances, the history, the factual matrix, are to be taken into account in deciding whether there was such an arrangement. The Court will look at all the circumstances and draw any proper inferences…”

12 Re Oldham, Hadwen v Myles [1925] Ch 75 at 87.

13 Re Cleaver, Cleaver v Insley [1981] 1 WLR 939 (Ch) at 947; Birmingham v Renfrew (1937) 57 CLR 666 (HCA) at 681 per Dixon J.

14 Lewis v Cotton, above n 2, at [57].

15 Fry v Densham-Smith, above n 11, at [3].

[24]   The requirement for clear and cogent proof of an agreement is based on the principle that, where a thing is inherently improbable (such as an inferred mutual will), it takes more cogent evidence to persuade a court to find that the balance of probabilities lies in that direction.16

[25]   This is especially common for domestic parties who often enter into “agreements” without any intention to be legally bound by those agreements.17 This is evident in decisions that preclude the doctrine of mutual wills from applying when the evidence simply reflects an honorary agreement;18 mutual expectation or desire;19 coincidence;20 or where any other evidence negates the inference of a relevant agreement.21

[26]   This view was picked up in Lewis v Cotton, when Blanchard J discussed such agreements and stated:22

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

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

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

16     Legg v Burton [2017] EWHC 2088 (Ch), [2017] 4 WLR 186 at [28]-[29].

17     Birmingham v Renfrew, above n 13, at 674-675.

18     Lord Walpole v Lord Orford (1797) 3 Ves Jun 402 at 420.

19     Re Goodchild (Deceased) [1997] 1 WLR 1216 (Ch) at 1225; Charles v Fraser [2010] EWHC 2154 (Ch), [2010] WTLR 1489 at [59]; and Osenton v Osenton [2004] EWHC 1055 (Ch) at [33].

20     Healey v Brown [2002] EWCH 1405 (Ch), [2002] WTLR 849.

21     Re Oldham, Hadwen v Myles, above n 12.

22     At [48]-[50].

Summary of the law

[27]   Thus, the equitable doctrine of mutual wills recognises that the executors and trustees of a will may be required to hold affected assets upon a constructive trust in terms of a revoked will.23 The doctrine applies where:24

(a)there is 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;25

(b)the two testators made wills consistent with their agreement or arrangement;26

(c)there is a contract or mutual understanding (intended to bind each testator to a future course of action) that neither testator would deal with the property in a manner inconsistent with the agreement or arrangement (and therefore the provisions of the corresponding wills);27 and

(d)one of the testators has died without revoking their will.

Issues in this proceeding

[28]   The first, second and fourth elements of the doctrine as set out in [27] above are not in contention.

[29]   The sole factual issue to be determined is whether Lorraine’s Will and the Second Will were made in circumstances whereby:

(a)there was a mutual agreement between Ian and Lorraine:

(i)to dispose of the relevant property in a particular way; and

23     Lewis v Cotton, above n 2, at [42].

24     Wilson v Saunders, above n 8, at [8]-[9].

25     Lewis v Cotton, above n 2, at [46].

26 At [46].

27 At [45].

(ii)not to revoke his or her will without the knowledge of the other; and

(b)the survivor has broken such pact.

[30]   If that is what the facts establish then a constructive trust may be imposed over the Estate and Ian’s son is to hold the property on trust for the beneficiaries of the Second Will, which Ian must in the circumstances have undertaken to be his last will.

Analysis

Facts

[31]   Lorraine and Ian met later in life having already established families. Ian had six children with his previous wife, Noelene. Lorraine had three children in her previous relationship with Warren McNeish.

[32]   Lorraine and Ian’s relationship started in 1982 and they were married in 1984. Their relationship was loving, stable and supportive and during their relationship they cared for and sought to provide for each other’s children.

[33]   Lorraine’s children were younger and lived with Lorraine and Ian after Ian moved into Lorraine’s home in 1984. Ian was the only real father Daryl had from the age of around 12 until he left for Australia when he was 21.

[34]   Lorraine and Ian brought few assets to the marriage. What assets they held when Lorraine died and later when Ian died were accumulated together during their relationship — at least from around 1990 onwards.

[35]   There is some evidence that Lorraine may have been unwell in December 2002 when the relevant wills were signed. But it is insufficient for me to conclude that she and Ian had been told she was suffering from the terminal condition that ultimately resulted in her death. That diagnosis was not made until July of the following year. Certainly there is no evidence of them having confided in any family member in December 2002 that she was seriously unwell at that time.

[36]   In late 2003, Daryl arranged a surprise trip to New Zealand for Christmas to visit Lorraine and Ian, together with his nephew Dylan (Joanne’s son). Naturally, Ian and Lorraine were delighted to see them.

[37]   Daryl recalled a night not long after he and Dylan had arrived in Reefton where he, Lorraine and Ian were having a cup of tea watching Coronation Street. He said they were talking “about lots of things in general and this is when Mum said to me that she had cancer.” She told him it was terminal. Ian didn’t say anything, he simply got up and walked out of the room. Nothing of any further materiality occurred on that trip.

[38]   A second surprise trip was organised in April 2004 and this time Daryl, Dylan, Joanne and Emily (Daryl’s daughter) travelled from Australia to Reefton to visit Lorraine and Ian. Daryl recalled that:

One night after dinner and the kids were in bed, Mum, Ian, Joanne and I were sitting in the lounge and Mum told Joanne and I that she and Ian had made wills so that when they both eventually passed away that we were going to be taken care of. Joanne then said “I don’t want to talk about wills, because that means you’re dying.” We didn’t discuss wills for the rest of this trip.

[39]   Daryl  arranged  for  another  trip   to   visit   Ian   and   Lorraine   between  13 October and 19 October 2004 – this time because “Mum was really sick and she wanted to talk to me.”

[40]   On that occasion, Ian and Lorraine advised Daryl that they were thinking of moving to Australia and wanted to give him some money to purchase a house in Brisbane so that Lorraine could spend the rest of her time close to her children and grandchildren.

[41]Daryl revealed:

Mum and Ian then told me the details of their wills. Mum said that James McArthur and I were to be executors of their wills after they both passed away, and that their estate was to be split 50/50 between the two families. 50% to us kids and 50% to Ian’s kids.

[42]   Ian and Lorraine eventually moved to Brisbane in January 2005 and lived in a house at Wavell Heights that Daryl had purchased for them with the deposit monies

they had given him. Daryl spent considerable time renovating the property for Ian and Lorraine.

[43]   Not long after Lorraine’s death in December 2005, Ian called Daryl asking for the repayment of the deposit and some monies given to him to do the renovations on the Wavell Heights property.

[44]   Daryl said he was completely floored by this request as he thought it was contrary to his mother’s wishes and “was so out of character” for Ian. He said “it was like Ian was a different” person.

[45]   Daryl and his wife Jayne repaid Ian the monies and they moved in to the Wavell Heights property. On the day they moved into the property, Daryl says that out of the blue “Ian said to me, in the front yard of the house, ‘I will honour your Mother’s wishes’”. He took Ian to be making a reference back to the 2004 discussion in Reefton about their wills.

[46]   Daryl’s conduct after Ian’s death is entirely consistent with his genuinely believing himself to be an executor of the Estate along with Ian’s son. And furthermore, that Ian would not have revoked the Second Will. I accept he was in a state of shock when he found that he was no longer named as an executor and that he and Joanne were not provided for in the Fourth Will.

[47]   Lorraine also acted consistently with her and Ian’s 2002 wills being mutual wills by relying on the mirror wills and not revoking or altering her will before her death.

[48]   When Ian died, naturally Daryl wanted a copy of the will as he still laboured under the misapprehension he was a co-executor with Ian’s son. While I find Ian’s son’s initial response to Daryl’s request for a copy of Ian’s will to have been pugnacious and insensitive in the circumstances, I find that each party has genuinely believed they were honouring their parent’s wishes. All have acted predictably along blood lines. No one is to be criticised for this all too human behaviour.

Mutual wills?

[49]   On the basis of the evidence I heard I am not satisfied the identical wills Ian and Lorraine made in 2002 (Lorraine’s Will and the Second Will) were mutual wills because there is no evidence that those wills would not be changed without their mutual agreement whilst they were both living and not at all after the death of the first of them to die if there had been no prior agreement. I now set out my reasons for reaching that conclusion.

[50]   I find on the balance of probabilities that when Ian and Lorraine revoked the First Wills and executed their mirror wills (without a non-revocation clause) in 2002, they were entering wills reflecting an honorary agreement of mutual expectation and desire and not an implied or inferred agreement as to non-revocation.

[51]   It is no coincidence in my view that the 1994 and 2002 wills were virtually identical. Lorraine and Ian clearly knew that wills in those terms could be revoked as they had done just that when they executed the 2002 wills revoking the First Wills. They were in receipt of legal advice at the time and any lawyer worth their salt would have advised them that wills are revocable instruments. In this case there are no file notes available to us documenting their lawyer’s advice to them but it is more likely than not they would have been given this advice.

[52]   There is no evidence of Ian and Lorraine expressly giving up the possibility of changing his or her will in the future. Rather, like many married couples, they appear to have operated on the assumption that each would provide for their children upon their death.28

[53]   It is significant that in the October 2004 conversation in Reefton, all that Lorraine and Ian did was to explain the terms of their wills. They made no mention of an ancillary agreement as to non-revocation.

[54]   Under cross examination, Daryl agreed that at no stage had either Lorraine or Ian indicated to him that they had a written or oral agreement to the effect that

28     At [31] and [49].

Lorraine’s Will and the Second Will were to be irrevocable. Nor did Daryl seek to clarify this aspect of the matter with Ian at any stage after Lorraine’s death.

[55]   Nor could Daryl explain why he thought Ian’s comment to him in the front yard of the home in Brisbane in 2006 was a direct reference back to the October 2004 discussion in Reefton.

[56]His response was as follows:

Ian said to me and I can remember it clearly, that he would honour my mother’s wishes. It is hard for me to explain this properly now but it was clear to me then and it remains clear to me now that he was referring to what he and Mum discussed with me in October 2004 when I visited them.

[57]In addition, Daryl said:

I just, I feel that once Ian got his money he wanted to reassure me that one day it would come back our way somehow, from the estate.

[58]   The alleged reference back by Ian to Lorraine’s wishes in 2006 is more likely to have been a reference to an honorary agreement of mutual expression of wish and desire in Lorraine’s Will and the Second Will, and not to an ancillary agreement not to revoke those wills.

[59]   At no stage did Ian ever make a representation as explicit as to say he would not alter the provisions of the Second Will. Words used in the cases relied upon by Lorraine’s children can be readily distinguished. Phrases such as “I will not alter the position” or “nothing will change” are what has tipped the balance in favour of plaintiffs in other cases. Rather, Ian simply said he would give effect to Lorraine’s wishes (whatever that might mean). Such an expression could have had a number of meanings. It is too much of a stretch to say it is more likely than not that the sole inference to be drawn from the word “wishes” was that an ancillary agreement for non-revocation was made.

[60]   There was no family meeting of both Lorraine’s and Ian’s children together with Lorraine and Ian to advise of their intentions. They only gave advice to Daryl and Joanne in October 2004 of the terms of the wills. This distinguishes this case clearly from the cases relied upon, where both parties have called a family meeting

including calling children from around the world to publicly state that there will be provision in certain terms and that the terms will not subsequently be altered.

[61]   For Lorraine’s children’s claim to succeed, the Court must accept that Ian was “acting in a deliberately dishonest way in respect of his recently deceased wife” when he made the Third Will in 2006.29 Lorraine’s children accept that this is not within Ian’s character. The changes in the Third Will are consistent with there being no non- revocation agreement between Ian and Lorraine. In the Third Will, Ian was still providing for family in the spirit of the initial mutual expression of desire to provide (leaving his property at Pines Beach to his granddaughter and step-grandson, and leaving his residual estate to his and Lorraine’s children equally) but in altered terms as he did not consider himself to be bound by the Second Will. So, even in his very first subsequent will following the execution of Lorraine’s Will and the Second Will (that is, the Third Will), the provisions differed to those in the Second Will. This distinguishes this case from those cases relied on where the deceased has executed a first subsequent will in similar or identical terms to the alleged mutual wills before ultimately departing from them in a second subsequent or final will.

[62]   Lorraine’s children’s claim must be ultimately regarded as founded on disappointment that the Second Will was not maintained rather than on a properly drawn inference that it would not be revoked.

Conclusion

[63]   For these reasons, I conclude that there is insufficient cogent proof to establish that Lorraine’s Will and the Second Will were mutual wills.

[64]   Having come to this conclusion, it is important for me to say that I entirely understand why Lorraine’s children brought this action. In cross-examination, Daryl revealed that he and his wife Jayne had executed identical wills in 2018 in a similar manner to Ian and Lorraine. Daryl stated that he and Jayne were operating on the basis they would not alter their wills without prior agreement. He conceded they had not

29 At [51].

and were not intending to enter into an ancillary non-revocation agreement as it was not necessary if you had mutual respect.

[65]   Given Lorraine’s children’s own moral code, it is understandable why they would make certain assumptions about the conduct of others including their mother and step-father (which have not been borne out here). Unfortunately, the law has strict requirements and does not support this approach, irrespective of how well-intentioned assumptions may be.

Costs

[66]   I reserve all question of costs. In doing so, and in the hope it might assist the parties to resolve that issue themselves, I note that I have a very clear view that all parties have acted in good faith and out of respect for what they consider to be the wishes of their parents.

[67]   If the parties are unable to resolve the question of costs, submissions are to be filed within 6 weeks of the date of this judgment. No more than 5 pages shall be required from any party.

Doogue J

Solicitors:

Canterbury Legal, Christchurch Wynn Williams, Christchurch