Supreme Court Treats a Contracting Out Agreement as a Will

In Rimmer v Wilton, a Contracting Out Agreement (COA – also known as a prenuptial agreement) was interpreted as Will to prevent a person inheriting from their deceased partner’s Estate.

What happened in this case?

David Rimmer and Carolyn Wilton were in a 16-year de facto relationship. They had no children together, but David had children from a previous relationship. They purchased a home. Their COA allowed the survivor to “occupy and use” the deceased’s share for life (‘life interest’). David died without a Will (called an intestacy). He owned funds, bonus bonds, chattels, and half the home.

When a partner dies, the survivor can divide the property according to the Property (Relationships) Act 1976 or inherit (under the Will or the Administration Act 1969 on intestacy). Carolyn chose to inherit. As the Estate was small, she inherited everything except David’s share of the home.

When Carolyn sold the home, David’s children wanted her to distribute his share of the proceeds. They argued that Carolyn could only inherit or keep her COA entitlements – not both. Also, that she agrees not to inherit by intestacy in the COA. The High Court and Court of Appeal disagreed – ordering that Carolyn could have both.

David’s children went to the Supreme Court, who agreed that surviving partners can receive both. Will-makers are free to give more in their Will. However, parties can agree not to inherit by intestacy in a COA, and in this case, Carolyn did. Effectively interpreted as a Will, the COA had David’s wish not to give Carolyn any more than the life interest. In signing, Carolyn agreed to not claim any more.

Unhelpfully, the effect of the decision is unclear. It suggests that Carolyn should return everything (funds, bonds, chattels) to the Estate. It is also unclear if the life interest expired when the home was sold, thereby requiring Carolyn to distribute David’s share of the proceeds of sale.

What this means for you

This case illustrates how prolonged and costly these disputes can get. It started in 2021 when the home was sold for $1.2 million – of which, David’s children only sought half. Take away the legal fees from multiple court cases and lawyers and the mental cost of obtaining judgement five years later – the children’s success was likely a pyrrhic victory. It could all have been avoided if David had a Will.

The consequence is clear. You must have a Will to ensure that your property goes where you want. Without a Will, courts may decipher and divine your testamentary wishes from your COA – a document that neither you nor your partner intended to act as a Will when you signed.

Also, because you can contract out of intestacy entitlements, if you have a COA, you should review the disentitling provisions to ensure the consequences are exactly what you intend.

If you would like to know more about how this affects you, contact one of our specialists Jay Pierce, Jennie Cox or Kim Proctor-Stephens to talk about this complex area of law.