Wills & Estates Law Update: mutual wills & family provision and unlawful killing & the forfeiture rule

High Court - Mutual Wills and Family Provision

The High Court of Australia in Barns v Barns [2003] HCA 9 (7 March 2003) examined the effect and validity of a contract for the making of mutual wills upon a family provision claim under the Inheritance (Family Provision) Act 1972 (SA).

The usual form of a contract to make mutual wills is that the parties agree to make wills in a certain form, not to revoke those wills without the consent of the other party to the contract and to act in a way so as to ensure that all property owned by them at their death devolve in accordance with the wills.

The decision of the majority (Callinan J dissenting) is important because it confirms that the rights and obligations arising from a contract to make mutual wills are liable to be affected by applications later made under family provision legislation.

The existence of the 'notional estate' provisions in the NSW Family Provision Act 1982 coupled with the High Court decision in Barns v Barns means that mutual wills contracts are not an effective device to defeat possible family provision claims. The High Court's decision also creates uncertainty about the use of mutual wills contracts as an estate planning tool even where family provision considerations were not the motivation for the mutual wills.

Unlawful killing and the Forfeiture Rule

Forfeiture Rule and the Forfeiture Act 1995 (NSW)

The Forfeiture Rule is the common law principle which provides that where a person is criminally responsible for the death of another, and that death is a material fact in the vesting of property in favour of that person, then the interest in that property is forfeited.

The first statement of the principle was made by Fry L J in Cleaver v The Mutual Reserve Fund Life Assurance [1892] 1QB147 at 156. He stated:

"It appears to me that no system of jurisprudence can with reason include amongst the rights which it enforces rights directly resulting to the person asserting them from a crime of that person."

In Hilton v Allen (1940) 60CLR 691 Dixon, Evatt and McTiernan JJ referred to"the principle that by committing a crime no person could obtain a lawful benefit to himself."

The practical application of the Forfeiture Rule is more often than not considered in the circumstances where the killer is a beneficiary of the slain benefactor. In those circumstances the rule is restrictively stated as:"A man shall not slay his benefactor and thereby take his bounty". In The Estate of Hall [1914] P1 Hamilton LJ considered the application of the rule was not limited to circumstances where the killing was a murder, nor to circumstances relating to the operation of a Will.

The authors of Wills and Intestacy in Australia and New Zealand (Hardingham Neave Ford) state:

"Finally, the exclusionary principle is not limited to cases where the person killed is the testator or the intestate. For instances, in a wider context, it can apply where a person entitled to an interest in property in remainder, whether under a Will or settlement, causes a premature vesting in possession of that interest by killing the holder of the prior interest. Thus, if the grandchild of an intestate, for example, kills her or his (that is the grandchild's) father before the intestate's death, it is submitted that the grandchild will not be entitled to share, by representation, in that part of the estate which would have passed to the father had he or she not pre-deceased the intestate."

The broad public policy and common law underpinnings of the Forfeiture Rule means that it also has application in the circumstances where a beneficiary has slain a fellow beneficiary and so gains an advancing of interest or an additional gift under a Will.

The decision of the New South Wales Court of Appeal in Troja v Troja (1994) 33NSWLR 269 led directly to statutory reform by the Forfeiture Act (1995) (NSW).

The NSW Forfeiture Act now provides the Supreme Court of NSW with the discretion to modify, where justice requires, the operation of the Forfeiture Rule. The Act provides for a mechanism in applying for "forfeiture modification orders" within 12 months of the death of the deceased person or alternatively for a late application. The Act applies to an unlawful killing (homicide) but does not apply to an unlawful killing that constitutes murder. The Supreme Court may modify the effect of the Forfeiture Rule where justice requires (such as, where the person who committed the unlawful killing had been subjected to severe domestic violence by the victim over a long period of time).

The Effect of Applying the Forfeiture Rule

The difficult issue is often what is the effect of applying the Forfeiture Rule. The Forfeiture Rule will only deprive a killer from those benefits which flow from the wrongful act. It "does not cross the line and take from him rights or interests which are not consequential upon the wrongful acts."

There is NSW authority to suggest that a person who benefits from a felonious slaying holds the benefit on a constructive trust (determining the identity of the beneficiary of the trust is often difficult). There is also NSW authority to suggest that the gift over provisions in a Will apply so as to bypass the beneficiary that committed the crime.

Another possibility is suggested by Mason and Carter in their text Restitution Law in Australia where the authors state the following:

"The holder of a vested remainder cannot by murdering the life tenant, accelerate the enjoyment of that interest. If, however, the remainder is vested in interest before the killing it represents a second example of a situation where the killer has some existing interest in the property before the crime. Since the law is not concerned to take from the criminal rights or interests which are not consequential upon the unlawful act, the appropriate solution appears to be to deprive the killer of the remainder for the period of the victim's life expectancy."

What should executors/trustees do?

In an estate or trust where an unlawful killing has occurred, the executor/trustee must consider whether the Forfeiture Rule and the Forfeiture Act apply. The executor/trustee must also determine the effect of applying the Forfeiture Rule so as to complete a distribution of assets or funds to the correct beneficiaries. It is often the case that the effect of applying the Forfeiture Rule is not clear. In those cases it is prudent for the executor/trustee to seek declarations from the Supreme Court as to the entitlements of the beneficiaries as a result of what has occurred. This will preclude a later claim that the executor/trustee got the entitlements of the beneficiaries wrong.