Binding verbal mutual wills agreement? Re Miglic and the multi-million dollar question

Summary

In February 2024, the Supreme Court of Victoria delivered judgment in relation to a ‘mutual wills agreement’ dispute and the quantum of an inheritance held on trust since 1977.¹ The Plaintiffs were successful in proving that their father and stepmother entered into a binding agreement not to change their wills without the other’s consent.

The Defendants were successful in proving that the deceased held money on trust for them, representing their entitlement from the estate of the deceased’s mother. However, the Defendants were not successful in proving that the capital held in trust was invested, so they were only entitled to the capital sum held on trust from 1977 without any capital growth.

Issues

There were two issues that the Court had to consider, being whether:

• Kurt and Marilyn made a binding agreement in 1993 not to change their wills without the other’s consent; and
• a significant part of Marilyn’s estate was moneys inherited from Marilyn’s mother Gertrude, which Marilyn held on trust for her brother’s children.

Background

The two Plaintiffs, Lisa Miglic and Andrea Esnouf, are the adult daughters of Kurt and Kate Miglic. The Plaintiffs’ parents separated when they were young, and the father re-partnered with Marilyn Cottrell.

In 1993, Marilyn and Kurt made wills that were significantly similar, with the result that, after both Marilyn and Kurt passed away, there would be a bequest of $200,000 to the children of Marilyn’s brother, with the balance to go to the Plaintiffs.

The Plaintiffs argued that Kurt and Marilyn made a binding agreement that they would not change their wills without the other’s consent. Kurt passed away in 2007 after suffering from senility for many years, and Marilyn inherited Kurt’s entire estate and the matrimonial home.

Marilyn had prepared subsequent wills in 2001, 2005, 2011, 2014 and 2018, and it was common ground that Kurt could not consent to any new will by Marilyn at least by 2005. In Marilyn’s final will, one fifth of each estate was to go to each of the Plaintiffs and the children of Marilyn’s brother.

Analysis

The mutual wills agreement

Justice Gorton accepted that it was ‘tolerably clear’ that Kurt and Marilyn had, in 1993, an expectation that neither would alter their will without the other’s consent. The question for the Court to determine was whether this was merely an expectation or whether Kurt and Marilyn intended to have a legally binding agreement.

Justice Gorton identified that it would be difficult to establish that there was a legally binding agreement, as:

• the alleged agreement was not recorded in writing;
• the agreement would have to be proved by hearsay evidence of prior representations made by Kurt and Marilyn 30 years ago;
• the Defendants would be unable to cross-examine those who made those representations; and
• memory can unreliable after the passage of a long period of time.

The Plaintiffs gave evidence that Kurt and Marilyn represented to them that Kurt wanted to put his assets in a trust to ensure that the Plaintiffs would ultimately inherit them, but as Marilyn wished to have control over their assets while she was alive, that Kurt and Marilyn had instead reached an agreement that:

• Kurt and Marilyn would leave all of their assets to each other, except for some assets which Marilyn would be free to give to the Defendants; and
• they had executed wills to this effect and that they would not change them without the other’s consent.

The Court observed that Kurt had previous wills that provided for some assets to immediately go to the Plaintiffs, and that the 1993 will represented a change in position and made the Plaintiffs dependant on Marilyn for any inheritance. Marilyn’s previous wills identified specific assets that would go to the Defendants.

The Court heard evidence that the solicitor who prepared the 1993 wills was not told of the alleged agreement not to change wills without consent. However, the Court also observed that at law, ‘the failure to mention such an agreement to the solicitor who prepared the wills was not a barrier to the finding of a mutual wills agreement’.² The Court, however, also heard evidence that there was discussion between Kurt and Kate, in relation to Kurt and Marilyn’s wills, and their life insurance policies, that Kurt and Kate’s children (ie, the Plaintiffs) would be looked after, and that Marilyn agreed that she would not change her will without his consent.

In the years that followed the 1993 wills, Andrea gave evidence of her discussion with her then husband and Kurt regarding Kurt’s concern that Marilyn was lending money to her brother and may whittle away the Plaintiff’s potential inheritance, and that, when discussing the option for a trust over his assets, Kurt said that he could not do so because that would require a change of his will, to which Marilyn would need to consent.

When Kurt passed away in 2007, all of Kurt’s estate passed to Marilyn. Neither of the Plaintiffs made an application for provision,³ which was consistent, the Court found, with their previous evidence that there was an agreement for Marilyn to have the entire estate for her lifetime but would subsequently leave it to them in her will.

In the years that followed, Marilyn made further wills which reduced the Plaintiffs’ inheritance entitlements.

It was also argued by the Defendants that any agreement, if one existed, was subject to a caveat whereby Marilyn was free to alter her will without Kurt’s consent in order to bequeath to whomever she wished, or to her brother’s children, money that can be attributed to Marilyn’s inheritance of her mother Gertrude’s estate.

Recognising the passage of time and the fact that what was alleged between Kurt and Marilyn was an oral agreement, the Court emphasised that the Plaintiffs’ ‘inability to recall the precise words used by Kurt and Marilyn when they were describing their arrangement to them is not fatal to their case’.⁴ The Court also emphasised that it is ‘a matter of common experience that someone can remember the substance of a communication rather than the precise words’.⁵

The Court was also required to consider whether factors like the conduct of the proceeding and the fact that the Plaintiffs’ claim initially commenced on the basis that they were alleging that Marilyn did not have testamentary capacity for her final will is proof that there was no agreement. The Court however found that the fact that testamentary capacity was the initial main ground for the claim did not assist the Defendants’ argument that the mutual wills agreement should be doubted.

Additionally, the Court heard arguments that the Plaintiffs’ failure to mention their intention to challenge Marilyn’s will in discussions with the Defendants should not be viewed in isolation. The Court emphasised that the parties have a human element and their actions need to be considered in light of the fact that their long-term stepmother passed away, and the Court was ‘not surprised that they delayed the unpleasantness associated with attempting to deny [the Defendants] of their inheritance for the period immediately following Marilyn’s death’.⁶

The rights to inheritance from Gertrude’s estate

In relation to the trust over Gertrude’s assets, the Court found that:

• Gertrude passed away with assets worth approximately $200,000;
• Marilyn would have received approximately $100,000 of this on trust for the Defendants;
• There was likely to be probate duties payable on Gertrude’s estate when she passed in 1977; and
• Marilyn’s 1988 will, which devised and bequeathed $60,000 to the Defendants by reference to the estate of Gertrude Cottrell, was contemporaneous evidence and the best evidence available of the amount of Gertrude’s estate available to the Defendants.⁷

The Defendants argued that they should be entitled to an increased amount on the basis of an assumption that Gertrude’s estate would have been invested, and that this would lead to a final amount of $900,000. However, there was no evidence that the capital from Gertrude’s estate had been invested so there would be no accumulation for investment returns.⁸

Conclusion

The Court found that, on the whole, and on the balance of probabilities, the Plaintiffs established that Kurt and Marilyn in 1993 agreed that neither of them could change their wills without the other’s consent, in an agreement ‘that was intended to be legally binding’.⁹

The Court also found that the Defendants were entitled to a declaration that $60,000 was held on trust for them pursuant to Gertrude’s will, and that there was no capital accumulation from investment returns.¹⁰

This article was written by Simon Crawford, Partner and Matthew Carlei, Solicitor.

¹Re Miglic [2024] VSC 40 (‘Re Miglic‘).
²Ibid [26], citing Renfrew v Birmingham [1937] VLR 180, 184–6.
³Under Administration and Probate Act 1958 (Vic) Pt IV, which provides for testator’s family maintenance claims.
⁴Re Miglic (n 1) [81].
⁵Ibid [82].
⁶Ibid [101].
⁷Ibid [119]-[124].
⁸Ibid [132].
⁹Ibid [116].
¹⁰Ibid [138].