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When can your will be defeated or disregarded?

Succession Law News | June 2012

There are certain circumstances where the promise of a deceased testator to leave property to a beneficiary be upheld by a court, notwithstanding the testator does not in fact leave the relevant gift to the beneficiary in their will. There are three "ingredients" that must be present before this can occur:

  1. The testator (often a parent or elderly relative) makes a promise or assurance to the beneficiary and the testator intends that the beneficiary will act (or not act, as the case may be) in reliance upon the promise or assurance; and
  2. The beneficiary does in fact act (or not act) to his or her detriment because of the beneficiary's reliance upon the promise or assurance that has been made to them by the testator; and
  3. The testator ultimately unconscionably fails to follow through with the promise or assurance that the beneficiary has relied upon to his or her detriment.

If all of the above factors are present, a "proprietary estoppel" may arise in favour of the disappointed party, which essentially gives them an "equitable" or "beneficial" interest in the property in question. The estoppel that arises here may be vindicated by a "constructive trust", whereby the Court holds the testator to their promise by ordering that the person who in fact inherits the property (ie. the new legal owner) holds it on trust for the disappointed party.

In the kind of scenario described above, the key element is that the testator has acted unconscionably in failing to follow through with their promise to the disappointed party. It is also vital that the disappointed party's reliance on the promise of the testator is reasonable – that is, a proprietary estoppel or constructive trust will not arise where it is shown that the disappointed party knew and understood that the testator might revoke the promise at any time. On the issue of detriment, this need not be financial, and may involve the disappointed party giving up career or life opportunities based on the promises of the testator or other party.
The notion of proprietary estoppel and constructive trust is closely related to "family provision" legislation. In NSW, the law relating to family provision is contained in Chapter 3 of the Succession Act 2006, and essentially allows for provision from a deceased estate for close relatives and dependents of the deceased who were not provided for in the will.

Example: The Estate of Zvonko Grbin [2006] NSWSC 41

Here, the plaintiff claimed an equitable interest in a house owned by the deceased testator. The testator, it was alleged, had promised her a 75% share in the property upon his death, and the plaintiff had acted to her detriment in reliance on this promise. The plaintiff brought an alternative claim under the then Family Provision Act 1982 (now replaced by the Succession Act 2006). When the testator died in 2002, he left a 1/6th share in the property to the plaintiff, and the remainder to his wife and children. The property was then valued at around $770,000.00.

In 1980, the plaintiff and her husband moved into the property as paying tenants, sharing it with the testator and his family. In 1981, the testator and his family returned to Croatia permanently and asked the plaintiff to reside in and look after the property in their absence. In 1986, the testator stated to the plaintiff that, if she paid the rates and outgoings for the property and maintained it, she would inherit a 75% ownership share upon his death. This promise was repeated in 1989. In 1990, however, the testator made a will to reflect that the plaintiff was to receive a 1/6th share in the house only. The plaintiff was not aware of this will. The plaintiff continued to maintain the property, and expended considerable amounts of money in maintaining and improving it.

The Court found that a proprietary estoppel in favour of the plaintiff did arise here. The plaintiff had relied upon the promise of a 75% share in the house in expending more than $120,000.00 in the maintenance of the property, and in failing to purchase a property of her own. It was also found that the deceased had intended the plaintiff to act as she did in reliance upon his promise, and that it was unconscionable of him to fail to leave a 75% share in the property to the plaintiff as promised. However, rather than pursuing the equitable remedy of constructive trust that was available to her, the plaintiff took advantage of the simpler and more effective remedies that were then available to her under the former Family Provision Act (now the Succession Act).

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