University of Manitoba v. Sanderson Estate

Mutual wills refer to wills made by two people who agree that after the death of the first of them to die, the survivor will either not change his will, or he will not change certain gifts in his will.

For example, spouses in a second marriage may leave each other all or most of their wealth in their wills. The husband may provide that if his wife had died before him, half of his estate will go to his own children, and half to hers. The wife makes a similar will. The idea is that eventually the wealth remaining on the death of the last to die will be divided so that half of the wealth goes to the husband’s children, and half to the wife’s.
These are mirror image will’s, but not necessarily mutual wills.

If in our example, the husband and wife also make an agreement that neither of them will change their wills (or change the gifts to the other spouse’s children) after the other’s death, then the wills are mutual wills. In British Columbia, if the last to die then changes his or her will contrary to the mutual will agreement, then those whose interests are harmed by the change can sue to enforce the agreement.

Mutual will agreements raise a number of issues. For example, what if the surviving spouse doesn’t change his will, but gives away his assets during his lifetime. The will remains, but there is little or nothing left for his wife’s children to inherit. How can they assert any claim?

Mutual wills are not very common in British Columbia. Most of the court cases concerning mutual wills involve the question about whether the spouses entered into a mutual will agreement, or whether the survivor was free to make a new will. Absent clear language either in the will, or in a separate agreement, the courts in British Columbia have usually found that the spouses did not intend to bind themselves. I should note that although mutual wills usually involve wills made by either married or common-law spouses, any two people can make mutual wills.

One of the leading mutual will cases in British Columbia is University of Manitoba v. Sanderson Estate, (1998), 155 D.L.R. (4th) 40 (BCCA). In contrast to my examples, this case does not involve gifts to children made by spouses in second marriages. The intended beneficiary was a charity: the University of Manitoba.

Michael Sanderson and Katherine Sanderson each made wills on July 9, 1970, in which they each provided that his or her estate would be held in trust for the other for life, and then on the death of the last of them to die, their estates would go to the University of Manitoba. They also signed an agreement that provided that neither would change his or her will during their joint lives without the other’s agreement. After the death of one of them, the survivor agreed he or she would not change his or her will. They changed their executors and made minor changes to their wills by codicils while they were both alive.

Mrs. Sanderson died first on July 18, 1985. By that time, most of the Sandersons’ assets had been acquired by them after they made their mutual will agreement and were held in joint tenancies, with right of survivorship. This meant that the interest Mrs. Sanderson held in their assets flowed to Mr. Sanderson outside of her estate. Her executor did not even need to probate her will, because there was little or nothing in her estate.

After Mrs. Sanderson’s death, Mr. Sanderson changed his will to leave some of his estate to friends and family, thereby reducing the University’s share.

When Mr. Sanderson died, the University of Manitoba sued, seeking to uphold the mutual wills and assert against the other beneficiaries of Mr. Sanderson’s will, the University’s right to receive the whole of his estate under the mutual will agreement.

Some of Mr. Sanderson’s beneficiaries argued that because Mr. Sanderson did not receive a benefit under Mrs. Sanderson’s will (the assets flowing to him as the surviving joint tenant instead), he was not bound by the mutual will agreement after his wife’s death.

Although Mr. Sanderson’s other beneficiaries were successful at trial, the Court of Appeal rejected this argument, and held that it was not necessary for Mr. Sanderson to benefit from his wife’s will for him to be bound by the mutual will agreement. This is because it is sufficient that Mrs. Sanderson relied on the agreement in keeping her will, and it would be inequitable to allow Mr. Sanderson to change his will after she kept her will in reliance of the agreement.

Madam Justice Rowles wrote at paragraphs 44 through 46:

[44] With respect, I do not agree that either the probate of the will of the first to die, or a benefit flowing to the survivor from the will of the other, is a necessary condition for relief to be granted to the University on trust principles.

[45] This is a case in which there was an express agreement made that the mutual wills would not be revoked or altered during the joint lives of the parties to the agreement and that after the death of the first, the will of the survivor would not be altered or revoked. There was an exchange of promises and Mrs. Sanderson did not revoke her will, although she had the legal right to do so, before her death.

[46] The guiding principles to be applied in this case are to be found in Dufour v. Pereira, supra, in which the enforcement of an agreement in a joint will was held to be within equity's jurisdiction to prevent fraud. Equity considers it a fraud upon the deceased, who has acted upon and relied upon the mutually binding nature of the agreement, for the survivor to change the will and break the agreement. As the deceased cannot intervene to enforce the obligation, equity will enforce the survivor's obligation, despite the survivor's subsequent intentions.

The Court of Appeal agreed with the University of Manitoba. Because it would be against good conscience to allow Mr. Sanderson to change his will contrary to the mutual wills agreement, the Court of Appeal imposed a remedial constructive trust on his estate in favour of the University of Manitoba.