30-year-old oral agreement binds widow

Case note: Re Miglic [2024] VSC 20

On 8 February 2024, in the Trusts, Equity & Probate Division of the Supreme Court of Victoria, Justice Gorton handed down a decision which was largely dependent on proving the existence of a 30-year-old oral agreement affecting husband and wife wills.

In the case of Re Miglic, the plaintiffs (represented by Rigby Cooke Lawyers) succeeded in proving the existence of a mutual wills agreement which resulted in declarations that approximately 99% of an estate is held on trust for the plaintiffs.

The case is significant not just because mutual wills cases are relatively rare, but also because the mutual wills agreement, was an oral agreement made over 30 years ago and in circumstances where both parties to the agreement are deceased. Accordingly, the case is a very useful study of the principles which the Court will apply in assessing evidence. Re Miglic will have broad application with the potential to apply to any case which concerns:

• the weighing up of evidence about the existence of an agreement;
• the difficulties associated with evidence of recollections over a long period of time;
• rules of evidence where there is hearsay in respect of people who are deceased; and
• whether recollection of the substance of communications rather than precise words used is sufficient to establish an agreement.

The case had many other significant and interesting features, including a tracing counterclaim, intentional waiver of privilege and solicitor’s evidence.

Background facts

In 1993, Kurt and Marilyn Miglic made wills in substantially similar terms. Leaving aside some minor differences, the effect of the wills was to gift the entirety of each other’s estates to one another, with the entirety of the survivor’s estate to be left to Kurt’s daughters (the plaintiffs), who were Marilyn’s stepdaughters. Kurt had married Marilyn when the plaintiffs were very young, and Marilyn had no children of her own.

When Kurt was suffering from dementia, Marilyn made two wills which departed from the earlier 1993 will. After Kurt’s death in 2007, Marilyn made three more wills, each of which left more of her estate to her nieces and nephew (the defendants).

The plaintiffs asserted that Kurt and Marilyn made a binding agreement in 1993 that their 1993 wills could not be changed without the other’s consent. The threshold issue in the case was whether Marilyn was legally bound never to change her 1993 will.

As a point of principle, if a mutual will agreement is found to exist, then the terms of the wills made pursuant to that agreement are superimposed by way of a trust over the estate of the survivor and any later or inconsistent will¹. Accordingly, the plaintiffs sought a declaration that Marilyn’s entire estate was held on trust for the plaintiffs pursuant to the 1993 will, as opposed to any of Marilyn’s later wills.

Principles of mutual wills

There are several challenges to proving the existence of a mutual will agreement, each of which was acknowledged by the Court in Re Miglic:

• corresponding or ‘mirror’ wills do not, on their own, give rise to a finding that the wills operated as ‘mutual wills’²;
• the making of wills by a couple in a particular pattern does not, without more, give rise to a finding that each of them intended to be legally bound never to change their will irrespective of a change of future circumstances³;
• a mutual will agreement requires clear and satisfactory evidence and those who undertake to establish such an agreement assume a heavy burden of proof⁴;
• in deciding whether a mutual wills agreement has been proven, the Court must take into account the nature of the claim made and the gravity of such a finding⁵ [implicitly, that it is a significant matter to impose a departure from an otherwise valid will, and also to find that a person intended to legally bind themselves to an act that sacrifices freedom of testation]; and
• notwithstanding all of the above observations, the standard of proof remains that of the balance of probabilities, so that the plaintiffs must establish, on the balance of probabilities that:
  • the relevant testators reached an agreement;
  • the agreement was intended to be legally binding; and
  • it was a term of the agreement that neither testator would change their will without the other’s consent.

Other evidentiary principles

In addition to the matters of principle specific to mutual wills, a significant feature of Re Miglic is that the mutual agreement in question was an oral agreement. Further still, it was an oral agreement reached between two people who have since died. In those circumstances, other principles examined by the Court which have broader application are that:

• the agreement must be proved by hearsay evidence of prior representations;
• with the best will in the world, honest people’s memories can with time become unreliable and the risk of memory becoming unreliable is very real in the context of litigation where people have a lot to lose or gain by their evidence ⁶;
• when a contract is written, the parties will usually have carefully considered the terms in which their agreement is to be recorded and so its intended meaning can be gleaned by considering the words used⁷. The situation is more complicated in the case of an oral agreement. It is more difficult still, where the oral agreement was reached in private discussions and has to be established from how the parties later described their dealings to others⁸; and
• when an oral agreement is alleged, typically ‘there are no definitive words to interpret’ and it is ordinarily sufficient to plead the ‘purport’ of a conversation or to particularise the ‘substance’ or ‘effect’ of what was said rather than to attempt to set out what was said verbatim⁹.

The Court was able to, and did, consider evidence about representations made by both the plaintiffs’ stepmother and father in relation to their will-making and the issue of the mutual wills agreement. The hearsay evidence was admissible, pursuant to section 63(2) of the Evidence Act 2008 (Vic) because both testators had died. In practical terms, there is an exception to the hearsay rule in civil proceedings where the maker of a previous representation is not available to give evidence about an asserted fact.

In all the circumstances, the Court held that, while the standard of proof remained that of the balance of probabilities, the plaintiffs’ evidence would need to be scrutinised carefully¹⁰.

Finally, when considering a mutual wills agreement, the Court held that the relevant consideration is the mutual promise by each party to the agreement never to change their will without the other’s consent. It is not necessary to show any other benefit – for example, that a particular asset should pass in a particular way¹¹.

Assessing evidence of an oral agreement

The plaintiffs’ gave substantial evidence in chief and were cross-examined extensively. In assessing the plaintiffs’ evidence, the Court made the following significant observations:

• it is somewhat artificial to expect any person to recall precise language used to a level of specificity in terms of the exact words after such a long period of time [in this case, 30 years]. An inability to recall the actual words used is not necessarily fatal to a case¹²;
• the proper enquiry is of the substance of what was conveyed [by way of prior representation] notwithstanding that the precise words cannot now be recalled. It is sufficient if [the evidence] can convincingly establish the substance, or import, of what was said in a manner than establishes [the mutual will agreement]¹³;
• variations in the way communications are described on different occasions might lead to a conclusion that the recollection of the substance or import of what was said is not reliable. However, a mere change in language, or emphasis, without a change in the substance or import, will not establish that the substance or import has not been reliably recalled¹⁴;
• pleadings, outlines of evidence and position papers prepared by lawyers do not, for the most part, purport to be in the exact language of witnesses, even though they are prepared on instructions. Discrepancies in language between different forms of document do not necessarily mean that a person’s recall is defective¹⁵;
• it is not sufficient that witnesses giving answers to questions asked relating to central issues in the case give honest answers’. Their evidence must not just be honest, but must also be reliable. People may develop honestly held but false, or falsely precise, memories¹⁶; and
• because of inherent problems with memory over time and the risk of misinterpretation of communications even at the time they were made, evidence as to the substance of what was said should be evaluated in the context of surrounding events or circumstances which are either agreed to have occurred or which the Court finds did probably occur¹⁷.

The Court’s findings

The Court ultimately held that the plaintiffs did discharge their onus in proving the existence of the oral mutual wills agreement. The Court reviewed the evidence in great detail. This included evidence from:

• the plaintiffs who were the intended beneficiaries of the relevant mutual wills (and to whom prior representations had been made by the will-makers);
• the second to fourth defendants who were the beneficiaries of several wills made later by the plaintiffs’ stepmother; and
• independent witnesses, including the plaintiffs’ mother; the ex-husband of one of the plaintiffs, the will-drafting solicitor and the stepmother’s accountant.

The plaintiff’s solicitor, Christian Teese, also gave evidence in relation to the circumstances in which instructions had been given by the plaintiffs to their solicitors. In this regard, the plaintiffs waived privilege over communications with their lawyers that took place prior to mediation in the proceedings. The parties agreed that the file notes could be relied on to prove what was said to Mr Teese, but, pursuant to s 136 of the Evidence Act 2008 (Vic), were not to be used as independent proof of the truthfulness of what was said.

The Court concluded that the plaintiffs’ evidence in relation to the central issues of the case was both honest and reliable. The Court also found the evidence of the plaintiffs’ supporting witnesses to be impressive and compelling.

A significant factor against the plaintiffs was that the testators never mentioned a mutual will agreement to their will-drafting solicitor. However, this was held not to be fatal to the plaintiffs’ case¹⁸.

The objective surrounding events or circumstances which the Court had regard to in accepting the plaintiffs’ evidence included:

• the mutual will-makers’ relationship, including their relative ages and the stepmother not having her own children;
• the fact that the plaintiffs’ father was the primary breadwinner;
• the significant changes to the will-making pattern between the relevant 1993 wills and both the will-makers previous wills;
• a family meeting which was accepted to have occurred at which the will-makers made relevant representations to the plaintiffs;
• representations made by the plaintiffs’ father to the plaintiffs and others which occurred after the family meeting (there were 5 separate relevant occasions considered);
• the circumstances in which later wills were made by the plaintiffs’ stepmother which breached the mutual wills agreement; and
• representations made by the plaintiffs’ stepmother to one of the plaintiffs following their father’s death.

Counterclaim and tracing

The defendants introduced a late counterclaim during trial, alleging that the plaintiffs’ stepmother held a very small portion of her estate on a trust which preceded any trust found to be imposed on the stepmother’s estate by reason of the mutual wills agreement.

In summary, the defendants contended that the plaintiffs’ stepmother received a life interest in a sum of money under her own mother’s will, and that the remainder interest in that sum was held on trust under that will for the stepmother’s nieces and nephew.

The defendants went further to allege that an inference could be drawn that the stepmother had invested the sum subject to the life interest in assets in which there had been capital growth, so that not only the ‘initial sum’ subject to the life interest was held on a separate trust, but also the capital growth in that asset.

The Court rejected this aspect of the counterclaim in circumstances where the stepmother held a mixture of both ‘growth assets’ and ‘non-growth assets’ and there was no evidence about which of those assets any life interest monies had been invested. Consequently, the Court refused to trace the initial asset into growth assets absent direct evidence that the monies were so applied. The Court held that to trace funds in that manner without direct evidence would be impermissible speculation¹⁹. It followed that only the small initial capital sum was declared to be held separately.

Conclusion

Re Miglic will be a very useful case to which practitioners must have regard given how the Court will evaluate extensive evidence both oral and documentary, as well as the application of principles of evidence to that exercise. The plaintiffs’ success in overcoming substantial hurdles in proving an oral agreement is an instructive example of the Court’s approach and willingness to carefully scrutinise and weigh up evidence in these cases. Other features of the case including the waiver of privilege and solicitor’s evidence merit a detailed look in terms of the practice of establishing oral agreements.

_References

<sup>1. See Re Miglic at [6] and also, eg, Birmingham v Renfrew (1937) 57 CLR 666, 682-691 (Dixon J): Baird v Smee [2000] NSWCA 253, [65] (Giles JA).
2. See Re Miglic at [9] and also, eg, Birmingham v Renfrew (1937) 57 CLR 666, 674-675 (Latham CJ).
3. See Re Miglic at [9] and also, eg, Birmingham v Renfrew (1937) 57 CLR 666, 674-675 (Latham CJ); Baird v Smee [2000] NSWCA 253 [67] (Giles JA); Osborne v Osborne [2001] VSCA 228, [29] (Buchanan JA).
4. See Re Miglic at [11] and also Birmingham v Renfrew (1937) 57 CLR 666, 681 (Latham CJ)
5. Ibid and also Evidence Act 2008 (Vic) s 140(2); see Osborne v Osborne [2001] VSCA 228, [29] (Buchanan JA).
6. See, eg, Roberts-Smith v Fairfax Media Publications Pty Ltd (No 41) [2023] FCA 555, [162]-[166] (Besanko J); Watson v Foxman (1995) 49 NSWLR 315, 319 (McLelland CJ in Eq).
7. see, eg, Toll (FGCT) Pty Ltd v Alphaphram Pty Ltd (2004) 291 CLR 165, 180 [43] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ), quoting with approval from Wilton v Farnworth (1948) 76 CLR 646, 649 (Latham CJ).
8. See Re Miglic at [79].
9. See Re Miglic at [81] to [82] and also see, eg, Realestate.com.au Pty Ltd v Hardingham (2022) 406 ALR 678, 688-689 [45] (Gordon J) and Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 13.03.
10. See Re Miglic at [11].
11. Ibid. at [115].
12. Ibid at [14].
13. Ibid at [82].
14. Ibid.
15. Ibid at [84].
16. Ibid at [116].
17. Ibid at [15].
18. Ibid at [26].
19. Ibid at [119] to [136], in particular [134].</sup>