CTs 1: Secret Trusts and Mutual Wills

Question 1

Crossco Unlimited v Jolan

Answer 1

No remedial CTs under English law - so courts cannot simply find a constructive trust where they think it is equitable to do so. There are only institutional constructive trusts, i.e. those which are based on legal rules.

Question 2

Half-Secret Trusts and Fully Secret Trusts - Definitions

Answer 2

Half-secret trusts are where the existence of the trust is disclosed, but the terms of the trust are NOT disclosed in the testator’s will.

Fully secret trusts are where neither the existence of the trust, nor its terms, are disclosed in the testator’s will.

Question 3

s.9 Wills Act 1837

Answer 3

This sets out the formalities requirements for a valid will, and therefore for a valid testamentary trust. s.9 Wills Act 1837 provides that a will is only valid if it is signed by the testator and there are TWO witnesses who also sign the will.

Note that the courts are willing to find some trusts valid under CTs even if they do not comply with the formalities set out under s.9 Wills Act 1837 - secret trusts and mutual wills.

Question 4

Kasperbauer v Griffith

Answer 4

3 essential requirements for any secret trust - so this applies to both HST and FST.

1) Intention to create the trust
2) Communication to trustee
3) Acceptance by trustee

Court held that HST failed here because the testator had not properly communicated the terms of the trust to T, nor had T accepted - therefore no HST and wife was entitled to property absolutely.

Question 5

Wallgrave v Tebbs

Answer 5

For a fully secret trust, communication of the terms of the trust MUST be made during the testator’s lifetime - S must communicate his intention to create a fully secret trust, as well as the content/terms of the trust.

So if S leaves instructions after he dies about the FST, then the FST will not be valid

Question 6

Re Boyes

Answer 6

Terms of the trust must be communicated for a valid FST. So even if S and T agree on an FST in principle, it is not valid unless S also communicated the terms of the FST.

Question 7

Re Colin Cooper

Answer 7

Only the EXACT terms of the trust that were properly communicated to B form part of the FST - so if S changes his intention for the terms of the trust, but does not tell T about this, then only the exact terms communicated are terms of the FST

Question 8

Re Keen

Answer 8

The way in which the intention and terms of the FST are communicated to T do not matter, provided that they are communicated during S’s lifetime.

So where the testator gives a letter to T specifying the terms of the trust and this letter is in T’s possession before S dies, then this is valid because there has been communication during S’s lifetime.

Question 9

Re Stead

Answer 9

Issue - what happens where S does not validly communicate the terms and intention of the trust to ALL intended trustees?

Where Ts take as tenants in common, then only the individuals to whom the FST was validly communicated are bound as trustees.

However, where Ts take as joint tenants, then ALL of the Ts are bound - even if the FST was only communicated to some of them.

Question 10

Moss v Cooper

Answer 10

Acceptance by T can take effect either by words OR by silence - B needs to actively say ‘no’ to being a trustee for both HST and FST, in order for the secret trust to not be validly accepted by T.

Question 11

Strickland v Alridge

Answer 11

Where A relies on the agreement for a FST AND HST by not complying with s.9 Wills Act 1837, then B is bound as a T under that agreement - so reliance by A prevents B going back on accepting that agreement

Question 12

Ottaway v Norman

Answer 12

Where A accepts and complies with the agreement of a HST/FST, B holds the property on CONSTRUCTIVE TRUST for X - i.e. whomever the agreement stated the property of the FST was to be held on trust for.

Question 13

Re Boyes

Answer 13

Situation is different where B does NOT comply with the FST. If B is ignorant as to the existence of the FST, then B takes the property absolutely.

But if B is ignorant to the TERMS of the trust, but accepts that he is going to be a trustee in some way, then this would be a failing trust - property held on RT by B for A’s estate

Question 14

HST/FST PQ Approach

Answer 14

1) Kasperbauer v Griffith - 3 requirements for secret trust
2) Identify whether HST/FST - was the existence of the trust disclosed in testator’s will?
3) Communication
4) Acceptance

Question 15

Blackwell v Blackwell

Answer 15

Communication of the terms of the HST must be made before OR at the time of execution of the will. A CANNOT communicate the terms of the HST after the will has been executed

Question 16

Re Bateman’s WT

Answer 16

Court held that the words “as SHALL be communicated by me in a sealed letter” indicated a future constructive communication off the HST, therefore HST failed as the terms were not communicated before or at the time of execution of the will

Question 17

Re Gardon

Answer 17

Where communication of the HST is NOT made to some of Ts, then the only case in which all Ts are bound is where THE WILL provides that communication of the HST will only be made to ONE of the Ts - otherwise the HST is invalid

Question 18

Re Keen - Terms of will/terms of HST

Answer 18

Where the terms of the HST conflict with the terms of the testator’s will, then the HST will NOT be validly created. Instead, it will be a failing trust so the property will be held on RT for the testator’s estate

Question 19

Re Spence

Answer 19

Where the HST instructions do not follow the provision in the will (stating that the info will be communicated), then the HST will be fail

Question 20

Re Maddock

Answer 20

If the secret trustee for a FST dies before the testator, then the secret trust fails.

Question 21

Sonley v Clock Makers’ Company

Answer 21

HST do NOT fail where T dies before the testator, because on the facts of the will there is already a valid trust in place - just the exact terms are arranged separately.

Question 22

Re Gardner (No.2)

Answer 22

Where the secret beneficiary dies before the testator in a HST, then the property is held on trust for the beneficiary’s estate.

For FST, if the secret B dies before the testator, then there is a RT in favour of the testator - failing trust.

Question 23

Mutual Wills - General Situation

Answer 23

MW arise where A and B both make wills at the same time, and they state in their wills that if the other dies first, then they will transfer them the property and then B will leave everything to C once B dies. Courts will then hold that B is under an obligation to leave the property to C in their will.

Question 24

Re Heys

Answer 24

Where B then decides to gift the property to D instead of C upon their death, then the court will hold that D holds the property on trust for C - B was a trustee under a CT in C’s favour already, so D simply steps into B’s position

Question 25

Re Dale

Answer 25

This rule applies in a different situation - where both A and B agree to give their property to C upon either of their deaths, then this can also be a valid mutual wills arrangement.

So where A and B both write in their wills that they will each give property to C separately upon their deaths, then this is a valid mutual will - C is still bound and must give their property to C also.

Question 26

Re Goodchild

Answer 26

Courts only look for a sufficiently firm agreement between A and B such that there is a contract at law - so doesn’t necessarily need to be a written agreement, just a firm enough agreement for a contract at law.

Question 27

Charles v Fraser

Answer 27

Courts are quite strict on firm agreement requirement, since it is assumed that B would NOT want to give up their testamentary freedom easily unless there was such a firm agreement.

Question 28

Lewis v Cotton

Answer 28

B can revoke the mutual will prior to A’s death, provided that B gives sufficient notice.

BUT, B CANNOT revoke their will after A dies.

Question 29

Healey v Brown

Answer 29

Court held that for MW in relation to transfers of land, s.2(1) LP(MP)A 1989 must be complied with - so MW transferring land or any interest therein must be made in signed writing.

However, this is almost certainly incorrectly decided since s.2(5) of the Act provides that s.2(1) does not apply to CTs - mutual wills are constructive trusts, so there should still only need to be a firm agreement here.

Question 30

Re Hagger

Answer 30

This deals with the subject matter of the constructive trust in MW cases. If B acquires a life interest over A’s estate and C acquires a remainder interest, then B is only entitled to the capital income from A’s estate and CANNOT sell the capital assets - this is because the assets are left to C upon B’s death.

But note that this is not the usual situation - normally B does not just get a life interest, so Re Hagger only applies where B does get a life interest.

Question 31

Thomas and Agnes v Carvel

Answer 31

Court held that the CT only arises, and therefore B’s obligation only arises, upon A’s death.

Question 32

Birmingham v Renfrew - AUSTRALIAN CASE

Answer 32

This case tried to rationalise CTs in MWs by arguing that a CT arises upon A’s death which is floating - then only crystallises either at B’s death or where an improper disposition is made. However, Liew is critical of this and argues that there is no such concept of floating CTs in English law - so be sceptical about it