Mutual wills: be careful what you wish for

Yet, hot off the heels of Naidoo v Barton [2023] EWHC 500 (Ch) earlier this year comes the case of Colicci v Grinberg [2023] EWHC 1177 (Ch), in which the court held that a deed of mutual wills made by a divorced couple in 2016 was not overturned by a later shareholders’ agreement.

For those unfamiliar, mutual wills are wills made by two or more persons who agree to dispose of their property in a certain way and not to revoke or alter their wills without the consent of the other(s). Such wills create a binding contract between the testators, which can be enforced by the beneficiaries of the wills after the first testator’s death, effectively restricting the testators’ testamentary freedom. Such agreements are usually contained in the wills themselves, but this case illustrates that these types of arrangements can be equally effective when included in other documents.

Background

Ernesto and Josephine Colicci married in 1982 and had two children, Robert and Rosanna. Together, they established a successful ice-cream and catering business, ECSI Ltd.

The couple divorced in 2011, negotiating a clean break settlement and signing a shareholders’ agreement in respect of their business.

In 2014, Ernesto married Nora Grinberg and they later had a child together. Josephine also started a second family with her new partner.

Prompted by the new family additions, in 2016, Ernesto and Josephine entered into a deed in which they covenanted to leave their respective shares in ECSI Ltd to Robert and Rosanna, and to make wills to that effect.

In 2017, Ernesto, Josephine, Robert and Rosanna entered into a shareholders’ agreement, which ostensibly replaced the previous 2011 agreement. The 2017 agreement gave each adult child a portion of shares and promoted Robert to director. It also stated: “This Agreement, and any documents referred to in it…constitute the whole agreement between the parties and supersede any…previous agreement between them relating to the subject matter they cover, including the 2011 shareholders’ agreement” (clause 18).

Ernesto died unexpectedly in 2021, leaving a 2017 will, in which he left his shares in ECSI Ltd to Nora, contrary to the terms of the 2016 deed.

The dispute

Josephine, Robert and Rosanna contested Ernesto's 2017 will and instead sought to enforce the terms of the 2016 deed, arguing that this had not been revoked by the 2017 shareholders’ agreement or, if it had, that the 2017 agreement should be rectified accordingly.

Nora’s main defence was that the 2017 agreement had superseded the 2016 deed, and this was made clear by clause 18. Accordingly, Ernesto had been free to dispose of his shares as he wished and the 2017 will should stand.

Judgment

The judge held that the 2016 deed created a binding obligation on Ernesto and Josephine, prohibiting them from dealing with their shares on death other than as agreed: “The subject matter of the 2016 Deed was a mutual promise that any shares still held by Ernesto and Josephine at death would pass to the adult children, and a promise to make wills to that effect. It created testamentary obligations. It removed Ernesto’s and Josephine’s freedom to dispose of their Shares on death.”

He also concluded that the 2017 agreement did not supersede the 2016 deed, because the "subject matter" of the 2017 agreement was "the rights and obligations of the parties as shareholders", whereas the 2016 deed imposed "obligations on Ernesto and Josephine as testators" and conferred "benefits upon the adult children as beneficiaries".

Clause 18, as drafted, could not reasonably be interpreted as ousting the 2016 deed. A key factor in this conclusion was that, whilst clause 18 explicitly stated that the 2011 agreement was superseded, it did not mention the 2016 deed, which logically ought to have been the case if the parties had intended to revoke this document as well.

Accordingly, as a matter of construction, the claimants were victorious, meaning that Ernesto’s shares will pass to Robert and Rosanna in accordance with the 2016 deed, rather than to Nora pursuant to the provisions of the 2017 will.

Given this decision, it was not necessary to reach a conclusion on the rectification argument. Although, interestingly, the judge commented that had this been relevant, rectification would not have been available to the claimants, mainly because there was not sufficient evidence available that the parties to the 2017 agreement had shared the necessary common intention on entering into the document, which was then mistakenly recorded in the final agreement.

Concluding remarks

This case serves as yet another cautionary tale about the use of mutual wills and their potent effect. If you enter into such an arrangement freely of your own accord (there was no suggestion of undue influence here, as was at play in Naidoo v Barton), this judgment indicates that the courts will uphold the agreement, regardless of whether a testator later changes their mind.

It is also clear from the decision that such agreements do not need to be contained in the wills themselves to be binding: a separate document can be just as effective. Whilst testamentary freedom is the starting point in England and Wales (unlike in many other jurisdictions), testators can knowingly set their own limits on this, which the courts will honour. Mutual wills (or equivalent documents) should therefore never be entered into lightly and their lasting impact should not be underestimated.