The decision of Haggarty v Wood (No. 2)  QSC 244 was handed down yesterday by Jackson J in an alleged testamentary contract case. I appeared for the defendant.
Almost 2 years ago the plaintiffs had their statement of claim struck out, with leave to re-plead. See Haggarty v Wood judgment here. Since then the statement of claim was amended. The defendant applied for, and obtained, summary judgment, on the basis that the facts as pleaded could not sustain a cause of action.
Jack Haggarty owned all of the shares in a company. The company was the registered proprietor of 5 lots of land near Ipswich.
In 1991, Jack and his wife Irene executed wills, each providing for the whole of their estate to be left to their son (the first plaintiff) and daughter (now deceased).
In 1997 Irene died, leaving her estate as per her 1991 will.
In 1997, after Irene’s death, Jack made another will, again leaving the whole of his estate to his son and daughter.
In 2004, Jack made another will leaving his estate to his then de facto spouse (the defendant).
In 2006, Jack transferred the shares in the company to himself and the defendant as joint tenants.
In 2006 and 2007, the company sold the 5 lots under Jack’s direction.
In 2010, Jack made his last will, leaving the whole of his estate to the defendant.
Jack died on 10 August 2012.
The plaintiffs sought, against the defendant, declarations that she held the company shares on constructive trust for their benefit, or alternatively, equitable compensation against her.
The executor of Jack’s estate was not a party to the proceeding, as there were no assets of value in the estate that could meet any claim.
The basis of the claim was an alleged multi-part contract, alleged as follows:
- that Jack and Irene made a contract resembling a contract for mutual wills
- that they promised to make testamentary dispositions of the 5 lots to the second plaintiffs (their grandchildren) and
- that they promised to make testamentary dispositions of the residues of their estates to the first plaintiff and his sister. The overall contract was described in the pleading as the “testamentary contract”.
It was alleged that Jack acted “unconscientiously or unconscionably” in:
(i) revoking his 1997 will and making his 2004 will;
(ii) transferring 50% of the company to the defendant; and
(iii) selling the 5 lots.
Each of those actions was also alleged to have been made by Jack in breach of the testamentary contract.
The claim made against the defendant was that Jack transferred “50% of the company to” her on 30 November 2006. In fact, Jack had transferred an interest to her as a joint holder of all of the shares in the company. The whole of the interest in the shares passed to her by survivorship on Jack’s death, not under his will.
The parties to the alleged testamentary contract were the plaintiffs, Jack and Irene, and their daughter.
Some of the alleged terms were that:
- each of the second plaintiffs (the grandchildren) was to receive one of the 5 lots;
- the first plaintiff and his sister were each to receive half of the rest and residue of the estates of Jack and Irene; and
- the survivor of Jack and Irene was to “maintain the testamentary provisions” until their death so as to ensure that the second plaintiffs received a lot each from the 5 lots as promised to them.
The consideration alleged to have been given by the plaintiffs was by way of contribution to the growth, success and profitability of the company over a period of years.
The company was not alleged to be a party to the testamentary contract (nor was it a party to the proceeding).
So the statement of claim alleged that in 1991 Jack and Irene made a will leaving the whole of their estate to their children. It was further alleged that Irene died in 1997 “having given effect to the testamentary contract”, and also that in 1997, after the death of Irene, Jack made a further will leaving the whole of his estate to their children. This was alleged to have “given effect to the testamentary contract”.
Jackson J identified four difficulties with the plaintiffs’ case as pleaded:
- There was an initial logical flaw in the allegation that the 1997 will gave effect to the alleged testamentary contract. By leaving the whole of his estate to his two children, Jack did not leave any of the 5 lots to the grandchildren, as the lots were owned by the company. Had Jack actually owned the 5 lots, a will leaving them to his children would not have left them to the second plaintiffs.
- The 5 lots were sold by the company in 2006 and 2007. On sale of the 5 lots, the proceeds of sale would have become property of the company. The separate legal existence of the company cannot be ignored, and yet the company was not alleged to have been a party to the testamentary contract. The allegation that the sale of the 5 lots was a breach of contractual promises made by Jack was an allegation of breach of contract by Jack personally and there was no claim made against the estate. The only claim made was against the defendant.
- The relief sought was not about the 5 lots, or the proceeds of sale of the 5 lots. It was a claim against the defendant for a constructive trust over the shares she held. There was no challenge to the validity of the transfer of the shares. There was no allegation that the plaintiffs were promised any interest in the shares or expected any interest in the shares. As such, there was no connection alleged between the second plaintiffs’ expectations to each receive one of the 5 lots and the defendant’s interest as holder of the shares.
- As to the first plaintiff, it was alleged that he was to receive half of the rest and residue of the estate. However, it was not alleged that any promise was made to him about the shares as such. It was alleged that the transfer to the defendant of her interest in the shares was made in breach of contract by Jack and that Jack thereby acted unconscientiously or unconscionably. His Honour found there was a gap in the logic of the claim as against the defendant. The claim was not supportable and summary judgment was ordered.
In summary, there was a claim for relief against the defendant as constructive trustee of the shares, measured by the value of the plaintiffs’ respective contributions to the assets and value of the company. The claim was based in alleged breaches of the testamentary contract by Jack. How those allegations were said to give rise to a proprietary or personal claim against the defendant as constructive trustee of the shares was not explained or supported by any other allegation of fact. Nor was there an allegation of fact that explained a personal claim against the defendant for compensation or other relief.
His Honour found there was a gap in the logic of the claim as against the defendant. The claim was not supportable and summary judgment was ordered.
You can read the case here.