In CASE you missed it…

It’s time for “In CASE you missed it”, where we examine a recent judgement that’s relevant to the will writing and estate planning industry. This time it’s an unusual case that demonstrates the perils of mutual wills; Colicci & Others v Grinberg & Another [2023]

Background & Claim

Ernesto and Josephine Colicci were married in 1982, later founding and managing a prosperous ice cream and catering enterprise called ECSI Limited (“ECSI”). They divorced in 2011, at which point they entered into a shareholders agreement in relation to their shared business.

In 2016, Ernesto and Josephine executed a deed stipulating their joint commitment to bequeath their ECSI shares to their joint children and to formalise this intent through respective wills.

Ernesto and Josephine both later met new partners and had further children. Subsequently, in 2017, they and their children established a new shareholders agreement that allocated some shares to their children, promoted Roberto to directorship, and notably included a clause that affirmed that the 2017 shareholders agreement superseded “any previous agreement between them relating to the subject matter they cover”.

Ernesto passed away in 2021 leaving a will that bequeathed all ECSI shares to Nora, Ernesto’s wife at the time of his death.

Josephine and her children with Ernesto brought a challenge against Ernesto’s will. They sought to enforce the 2016 deed and uphold Ernesto’s commitment to leave his shares to their joint children. Nora, however, defended the will on grounds that the 2017 shareholders agreement invalidated the 2016 deed.

The Law

Mutual wills are very distinct from mirror wills. While they are both types of will made usually by couples a mirror will is only named so because each will is a reflection of the other. Mutual wills on the other hand are legally binding on both parties. Mutual wills are usually made by spouses or partners and contain provisions reflecting an agreement between them regarding the distribution of their assets upon their deaths. Unlike typical wills, mutual wills include an understanding or contract that the terms of the wills won’t be altered or revoked without the consent of the other party involved.

In essence, mutual wills bind the parties to a contractual arrangement that dictates how their assets will be distributed. This arrangement is legally enforceable, and once one of the parties dies, the survivor is generally not allowed to change the terms of their Will.

The main features of mutual wills include:

1. Binding Agreement: The individuals making mutual wills have a binding agreement not to alter the terms of their respective wills without the other’s consent. This commitment is formalised in writing, usually by an express clause in the will but sometimes in a separate document.
2. Limitation on Testamentary Freedom: Traditional wills grant individuals the freedom to change the terms of their wills at any time before their death. However, mutual wills restrict this freedom for the surviving party, ensuring that the agreed-upon distribution of assets is upheld.
3. Enforceability: Mutual wills are generally considered legally enforceable contracts. If one party attempts to alter their will after the other party’s death in a way that goes against the mutual agreement it can be challenged in court. They are usually enforced by way of constructive trust.
   

The Judgement

The court concluded that the 2016 deed bound Ernesto and Josephine to a legally enforceable obligation against altering the disposition of their ECSI upon death, thus restricting their testamentary freedom. The court defined the 2016 deed as a “mutual promise” that created testamentary obligations on them both.

Furthermore, the court determined that the 2017 shareholders agreement did not supersede the 2016 deed. The former pertained to “rights and obligations as shareholders,” while the latter imposed “obligations as testators” and “conferred benefits upon the adult children as beneficiaries” so the wording in the shareholders agreement stating it superseded any previous agreement could not be referring to the 2016 deed as the subject matter the covered was their rights and obligations as shareholders only.

The court also held that the 2017 shareholders agreement could not be logically interpreted as superseding the 2016 deed as it expressly mentioned the 2011 agreement but failed to mention the 2016 deed. The court suggested that if the intent was to annul the 2016 arrangement, it would have been expressly stated.

As a result, the court ruled that ECSI shares should be transferred to Roberto and Rosanna, as dictated by the 2016 deed, rather than Nora under Ernesto’s will.

Conclusion

This is yet another case demonstrating the potential dangers of mutual wills. They are a tool that strips a person of their testamentary freedom and that the court will uphold, but as was the case here it may take lengthy and potentially costly litigation to reach that point. A person seeking to make a mutual will should very carefully consider the impact of them and how this may limit them or the other party should their situation change once it becomes too late to alter the agreement.

The full judgement can be accessed for free on Bailii here:  https://www.bailii.org/ew/cases/EWHC/Ch/2023/1177.html