9 June 2023

Can an agreement made between a couple after they divorce remove their testamentary freedom?

Background

Ernesto Colicci (‘Ernesto’) and Josephine Colicci (‘Josephine’) married in 1982. They founded an ice cream van business that later grew into a successful London based catering empire, ECSI Ltd (trading as Colicci) (the ‘Company’).

They had two children, Rosanna Colicci (‘Rosanna’) and Robert Colicci (‘Robert’).

The couple divorced in 2011, having negotiated a clean-break divorce settlement and signing a shareholder’s agreement (the ‘2011 Agreement’).

Ernesto married his second wife, Nora Grinberg (‘Nora’), in 2014. They had a child in April 2016.

On 22 April 2016, Ernesto and Josephine signed a deed (the ‘2016 Deed’) which required them to make Wills leaving their shares in the Company to their two children. Ernesto never told Nora about the 2016 Deed.

Ernesto executed a will on 12 May 2016 (the ‘2016 Will’) which left his shares in the Company to Rosanna, Robert, and his child with Nora. The residue was to be left to Nora. Josephine, Rosanna, and Robert did not know about the 2016 Will.

Ernesto executed a will in April 2017 (the ‘2017 Will’) by which he left his shares in the Company to Nora and appointed her as executor of his estate. He did not tell Josephine, Rosanna, and Robert about the 2017 Will.

Whilst the 2016 Deed dealt with the situation on death, it did not deal with the position of selling the shares during Ernesto or Josephine’s lifetime. Robert was also keen to confirm his position in the business. This led to a new agreement being signed in 2017 (the ‘2017 Agreement’). The 2017 Agreement included a clause dealing with the death of Ernesto or Josephine and that clause dealt not only with the impact of death but also bankruptcy and other events. It included a clause stating that the 2017 Agreement superseded previous agreements ‘relating to the subject matter covered’. Ernesto did not tell Nora about the 2017 Agreement.

Ernesto died unexpectedly of Covid in 2021. Josephine, Rosanna, and Robert disputed the terms of the 2017 Will (which left the entire estate, worth £4.75million, to Nora and the couple’s young daughter), and sought to enforce the 2016 Deed. Nora defended the claim, arguing that the 2017 Agreement superseded the 2016 Deed.

The Court found that the 2016 Deed imposed obligations on Ernesto and Josephine which were different from the 2017 Agreement. The 2016 Deed remained in force because the 2017 Agreement related to the transfer of company shares on death, whereas the 2016 Deed concerned the commitment to make a Will. The Court held that it would have expected explicit reference to the 2016 Deed being superseded if that was the intention.

The Court therefore held that the 2016 Deed had ‘created testamentary obligations’ on Ernesto and Josephine, and that it removed their ‘freedom to dispose of their shares on death’, and further, that the 2017 Agreement did not supersede the 2016 Deed. Robert and Rosanna’s claim succeeded, and they inherited Ernesto’s shares in the Company, worth c. £1.5million.

What should you take away from this decision?

The case is an interesting examination of how the Court must construe an agreement and consider the intentions and understanding of a party retrospectively in relation to that agreement.

Estate disputes can come in many forms – and sometimes there are promises and documents separate to a will that mean assets may not form part of an estate as expected by a testator. It is important to take estate planning advice and families with businesses do need particular attention to ensure there are no such promises/agreements which may impact intended bequests.

 

26 May 2023 by

Major works and dispensation – a cautionary tale

The notable case of Lambeth LBC v Kelly provides a cautionary tale as to when and how a landlord might […]

2 June 2023 by Keegan Williamson

Look before you leap: Section 106 agreements

Section 106 agreements, often referred to as planning obligations, are agreements that are entered into between the local planning authority […]

Signup To Our Weekly e-News

"*" indicates required fields

We’ll never share your details with any third party in line with our privacy policy.