Mutual Wills & Constructive Trusts

Thelma Bauer married Walter Bauer in 1967. Walter had three children Brent, Rod and Gay by his first marriage. Thelma had two children Caroleann and Helen by her first marriage

In December 1973, Thelma bought two lots of land in Buderim; after building a house on the land in 1984 this became Walter and Thelma’s principal place of residence. At about the same time the house was built, Walter bought a unit in Mooloolaba. Which he leased until his death in 1992 to tenants and received rents from the property.

It was shortly after Walter purchased the unit at Mooloolaba, that he and Thelma went to the same firm of solicitors and executed virtually identical wills. At the time, their only assets of substantial value were the Buderim property and the Mooloolaba unit.

The Wills granting to each other a life interest in the income of the estate of one another and thereafter, upon the death of the survivor, equally among both lots of their children.

In 1989 Walter and Thelma spoke to their children and discussed the fact that the wills had recently been made and outlined that they provided:

“for the testator who died first to live in the Buderim property and receive income from the Mooloolaba unit, and that when they died both the unit and the house were to be left to the five children … in equal shares.”

Walter died in December 1992. He had not revoked his 1984 Will or sold his unit therefore Thelma received the Mooloolaba unit. In March 1995 Thelma executed a new Will leaving her estate to all of the children in equal shares. In September 1996 Thelma transferred the Buderim property to her daughters as tenants in common. In 1997 Thelma made a new Will which left the Mooloolaba unit to Walter’s children with the residue of the estate left to her children.

In April 2007 Thelma died. Her daughters sold the Buderim property for $840,000. Walter’s children sought a declaration by the Queensland Supreme Court that the proceeds of sale should be held by Thelma’s children as constructive trustees for all the children in equal shares. The Court agreed adding as a corollary that Walter’s children held the Moloolaba unit as constructive trustees for all the children in equal shares.

A Court will impose a constructive trust when, having regard to the circumstances of the case, it would be unconscionable for one party to rely, as against the other party, on legal title to property as representing the actual interests of the parties.

Thelma’s children appealed, however the appeal was dismissed as there was sufficient evidence for the doctrine of mutual wills to apply.

 

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