In the matter of the estate of Michael Cahill, deceased.

John Kelly (plaintiff) v Nellie Cahill and Michael Cahill, junior (defendants).

Equity - Constructive trust - Deceased having benefited]second defendant in his will - Clear intention on the part of deceased to transfer lands to deceased and first defendant as joint tenants - Clear intention on part of deceased to revoke benefit to second defendant - Intention not achieved due to error - Whether lands the subject of a constructive trust in favour of the first defendant.

The High Court (Mr Justice Barr); judgment delivered 18 January 2001.

Where there was a clear, positive intention on the part of a testator that his wife should inherit all of his property on his death, and where the testator had taken appropriate steps to bring that about, and where he could not have known of the error by which this had not been achieved, it followed in those circumstances that justice and good conscience required that the second defendant should not be allowed to inherit any part of the testator's property and that his interest in remainder under the will of the testator should be deemed to be held under a constructive trust in favour of the testator's widow. It was irrelevant that the second defendant, who had benefited from the error, was neither aware of nor had any responsibility for the error which had been made.

Mr Justice Barr so held in finding that lands omitted in error from a deed of transfer intended to convey the entire of the testator's property into the joint names of himself and his wife did not pass under the will of the testator but was the subject of a constructive trust in favour of the testator's wife.

Brian Spierin SC and Michael Hourican BL for the plaintiff; Padraic O'Higgins SC and Sunniva McDonagh BL for the first defendant; Edward Walsh SC and Maire Whelan BL for the second defendant.

Mr Justice Barr said that the facts were not in dispute. The plaintiff was the sole surviving executor named in the last will and testament of Michael Cahill, senior (the deceased), made on 23 October 1969. The deceased had died on 20 March 1996, without having revoked or altered this will. The other executor had predeceased him and had not been replaced. The plaintiff had been granted probate of the will of the deceased on 22 January 1998, and had entered into the administration of the estate.

The first defendant was the widow of the deceased, and the second defendant was his nephew. The deceased was a farmer and owner of substantial holdings of registered lands, who had died without issue. By his last will, he had devised all of his property to his widow and his brother, Martin, as joint tenants for life with remainder to trustees in trust for the second defendant. Martin Cahill died on 16 March 1998.

In the course of administration of the estate, certain facts had come to light relating to the ownership of part of the lands comprised in the estate which had caused the plaintiff to seek directions from the court. The matters raised included: firstly, whether lands comprised in Folio GY043846F of the Register County of Galway passed under the terms of the will of the deceased to the first defendant for life and thereafter in remainder to the second defendant, subject to the first defendant's right to one half of the lands pursuant to the provisions of Part IX of the Succession Act, 1965; and, secondly, whether in the events which had happened, the second defendant was a constructive trustee of the reminder interest in the lands for the benefit of the first defendant.

The relevant facts were that in or about January 1994, the deceased and the first defendant called upon the deceased's solicitor and informed him that he wished to alter the will which he had made on 23 October 1969, since he no longer wished to benefit the second defendant, but wished to leave all of his property to the first defendant. Mr Justice Barr said that there was no doubt but that the deceased had changed his mind regarding the disposition of his property and had decided that his entire estate should be inherited by his wife absolutely on his death without any remainder provision.

However, his solicitor saw a disadvantage for the first defendant if this revised testamentary intention was achieved by way of a new or revised will. The difficulty was that a 2 per cent probate tax had been created by the Finance Act 1993, which the solicitor believed would be payable by the widow on the value of the estate inherited by her. In light of this, the solicitor advised the deceased that he could achieve the same result without liability for probate tax by transferring the property into the joint names of himself and his wife, the effect of which would be that the property would then pass to the first defendant as sole owner is she survived the deceased.

The deceased had agreed to this course of action and a deed of transfer dated 14 January 1994, had been drawn up by the solicitor to give effect to the revised instructions which he had received. The deed provided that the lands comprised in Folio 46909 of the Register County of Galway were transfered from the sole ownership of the deceased into the joint names of himself and his wife. The parties and their solicitor believed that it included all of the lands then owned by the deceased. However, the solicitor, in drawing up the deed, had made an error in that Folio 46909, prior to the execution of the deed, had been closed to Folio GY043846F of the Register County of Galway. This second folio comprised both the lands in the former folio and other substantial lands belonging to the deceased. The end result was that through the inadvertence of the solicitor and unknown to the deceased and the first defendant, the lands comprised in Folio GY043846F had not been fully transferred into the joint names of the deceased and the first defendant, and the lands which had not been transferred would pass on the death of the deceased to the first defendant for life with remainder to the second defendant, subject to the widow's legal right under the Succession Act 1965 to one half of the lands concerned.

Mr Justice Barr said that the net legal issue was whether a constructive trust arose comprising the lands which were not transferred into joint ownership as intended by the testator. That raised the question as to whether in the circumstances under review, it had been established that a "new model" constructive trust had been established and, if so, whether such a trust had a place in Irish law. Mr Justice Barr adopted the explanation of the concept of a "new model" constructive trust by Mr Justice Keane in his book Equity and the Law of Trusts in Ireland as follows:

"Broadly speaking, it may be said that the application of the principle of unjust enrichment requires the restoration by the defendant to the plaintiff of a benefit which it would be unjust for him to retain. Sometimes this can be done by a simple award of money, e.g. the refund of money paid under a mistake of fact. But sometimes the restoration of the benefit can only be achieved by giving the plaintiff an interest in property. Thus, the constructive trust is imposed by the court as an equitable remedy intended to restore to the plaintiff the benefit of which he has been deprived. In the words of Cardozo J `a constructive trust is the formula through which the conscience of equity finds expression': Beatley v Guggenhein Exploration Co 225 NY 380, at 386."

Mr Justice Barr said that the kernel of the question was whether the evidence established a clear, positive intention on the part of the testator that his wife should inherit all of his property on his death, that he took appropriate steps to bring that about and that he could not reasonably have known that through his solicitor's error the deed of transfer, which he and his wife duly executed, did not include all of his lands and that his stated intention to benefit his wife exclusively on his death was defeated in part. In the light of the affidavits of the solicitor and the first defendant, the accuracy of which was not in dispute, it was established that the testator expressed such an intention to his solicitor in clear terms and that he had good reason for believing that the deed of transfer did in fact achieve his intention that his wife would acquire absolutely as surviving joint owner all of his lands on his death.

Mr Justice Barr said that it was irrelevant that the second defendant was neither aware of or had any responsibility for the error which had been made. The essential element is that the testator changed his mind regarding the disposition of his estate after death and that he had taken appropriate steps to give effect to his revised intention. That having been established, it followed that in the words of Lord Denning in Hussey v Palmer [1972] 3 All ER 744, at 747, "justice and good conscience" required that the second defendant should not be allowed to inherit the deceased's property or any part of it on the death of his widow and that his interest in remainder under the will should be deemed to be a constructive trust in favour of the widow. Mr Justice Barr said that in his opinion a "new model" constructive trust of that nature the purpose of which was to prevent unjust enrichment was an equitable concept which deserved recognition in Irish law. In that regard, it accorded with the following observations of Mr Justice Costello in HKN Invest OY and Another v Incotrade PVT Limited (in liquidation) and Others [1993] 3 IR 152,at 162: "A constructive trust will arise when the circumstances render it inequitable for the legal owner of property to deny the title of another to it. It is a trust which comes into existence irrespective of the will of the parties and arises by operation of law. The principle is that where a person who holds property in circumstances which in equity and good conscience should be held or enjoyed by another he will be compelled to hold the property in trust for another."

Mr Justice Barr therefore held that the second defendant held the lands as constructive trustee for the first defendant and directed that he should execute such assurance as might be necessary to vest in the first defendant all of the lands comprised in Folio GY043846 of the Register County of Galway.

Solicitors: John M. Ford & Son (Galway) for the plaintiff; Emerson & Conway (Galway) for the first defendant; Tormey and Company (Athlone) for the second defendant.