Testamentary contracts

Gordon and Beverley Priestly were farmers who had 3 children. Their farming properties were owned by the GW Priestley Family Trust. Their son, Duncan, was the only child that worked on the farm. In 1986, Gordon assured Duncan that

“one day all of this will be yours”

Not long after Duncan resigned from his job as an engineer and started to work full time on the farm in the belief that he would inherit Salt Glen and the neighbouring property Caramba and a share of the other properties.

In 1996 Duncan complained to his father that:

“I am sick of doing all the work and everyone else getting the benefit. Unless I know for certain what I am going to end up with I can’t continue.”

Gordon told him that “You, your brother and sister will all end up with an equal share”.

Duncan said “That’s hopeless. You will have to run the place without me then.” he left the property, and started work as an engineering surveyor. Where he was paid more in a day than he was paid in a week working on the farm.

In 2001 Gordon purchased a property in Duncan’s name; Duncan and his wife moved onto the property in February 2001.

Gordon and Beverly’s relationship broke down in the late 1990’s and they divorced. The family entered into a settlement deed. Clause 1(a) of the settlement deed provided for various titles of land already in the sole names of Gordon and Duncan to remain with them and for Gordon and Duncan to agree between themselves whether to designate those properties differently.

Duncan believed that the settlement deed was made, with the intention that he would help his father maintain and run the farm and in recognition, Gordon would leave the farm to Duncan.

In 2007 Gordon made a will leaving his estate to Beverly and his 3 children equally. Less than two weeks before he died on February 2012 he revoked his earlier will and left his estate to Beverly only.

In addition to having a Will, many farmers incorporate testamentary contracts into their estate plans. These contracts aim to provide certainty for children who farm on land owned by their parents that the land will one day pass to them.

In order to form a legally binding testamentary contract there must be:

• an offer and acceptance
• intention to create a legally binding agreement
• consideration (not necessarily money)
• a legal capacity to enter a contract; and
• proper understanding and consent of what is involved.

The Court held clause 1(a) of the deed did not amount to a testamentary contract there was no agreement that Gordon would make a will in favour of Duncan or revoke a will without Duncan’s consent; Similarly there was no agreement that Duncan would receive the farming property held in Gordon’s name upon Gordon’s death in exchange for working on the farming property.

Clause 1(a) prevented Gordon and Duncan from disposing of land without the consent of the other during Gordon’s lifetime. However it did not prevent Gordon leaving the farming property in his Will.

Regardless of other mutual promises between Gordon and Duncan, Gordon was not under any obligation to not revoke his will, which is illustrated by his conduct in making later wills. If a testamentary contract existed, this would have prevailed even though probate had been granted over Gordon’s will.