secret & half secret trusts Flashcards
Blackwell v Blackwell [1929] AC 318
facts:
The testator gave legacies to five people to apply the income ‘for the purposes indicated by me to them’. Instructions to the trustees were made orally, to benefit the testator’s mistress and their illegitimate son.
principle:
The House of Lords established the validity of a half secret trust, satisfying the same basic requirements as a fully secret trust. Additionally, obiter, that should the secret trustee refuse to carry out the trust, this would not defeat the trust and a willing replacement would be appointed.
The trust was valid and enforceable
McCormick v Grogan (1869) LR 4 HL 82
facts:
The testator left property to Grogan and as he lay dying instructed Grogan that there was a letter instructing Grogan as to what to do with the property after the testator’s death. The terms of the instructions were not obligatory: ‘I do not wish you to act strictly on the foregoing instructions, but leave it entirely to your own good judgement to do as you think I would, if living, and as the parties are deserving.’ Grogan complied with some of the wishes but not all.
principle:
The wording of the letter was properly constructed as imposing merely a moral obligation upon Grogan. This was not sufficient to create a secret trust and therefore the claimant’s action failed.
Secret trusts are imposed to prevent a secret trustee from defrauding a testator, who only left property to the secret trustee in reliance on his promise to carry out the testator’s wishes.
C had not intended a trust but an absolute gift to G; there was no fraud involved
Moss v Cooper (1861) 4 LT 790
The testator left property to three secret trustees: G, S, and O. The will and details of trust were drawn up by one of the secret trustees, who then communicated the details of the trust to the other two secret trustees, who neither expressly rejected nor accepted. S did accept eventually but O remained silent on the issue.
principles:
It will be sufficient if the intention and terms of a secret trust are communicated to the trustees by an agent of the testator.
Silence can also amount to acceptance; knowing of the trust, he failed to object.
Ottaway v Norman [1972] 2 WLR 50
facts:
The testator left property to his housekeeper on the understanding that on her death she would leave the property to O. She died and left the property to N.
principles:
Sets out the requirements for a valid secret trust.
Land can be the subject matter of a secret trust.
Re Keen [1937] Ch 236
facts:
The testator had given one of his trustees instructions contained in a sealed envelope to be opened on his death. He did this before his will was executed. However, after he died the relevant bequest in his will stated that the property was left to the trustees for purposes that would be communicated to them in his lifetime.
principles:
Details of the secret trust could be in a closed envelope if, before the testator’s death, the trustee knew of the testator’s intention to create a trust and where he could find the terms of this trust (constructive communication).
The will must be consistent with the communication. The testator had already informed the trustees of his wishes, while the will referred to future communication.
The trust was void
what is a half secret trust
- The trust is on “the face of the will” but the beneficiary is not
- Half secret trusts will appear on the will – some sort of obligation will be obvious
- Would the beneficiary of the disposition exist
- Beneficiaries do not appear in the will
what is a full secret trust
- No mention on “the face of the will” of an existence of the trust
- Full secrets do not show on the face of the will
- The existence of the trust will not be obvious in the will – it will appear in the will as an outright gift
Reasoning behind Secret/Half Secret Trusts
- Origins come from testators who wanted to benefit banned or restricted religion (in secret).
- Will is a public document-testator might not want family/friends to know the existence of the secret beneficiary
- An agreement is made between testator and purported trustee as to the use of the money. The testator then leaves the money to the secret trustee in the will
- Potential for Conflict
- Testamentary law / S.9 Wills Act 1837/Trusts Law
Reasoning behind Secret/Half Secret Trusts
- Origins come from testators who wanted to benefit banned or restricted religion (in secret).
- Will is a public document-testator might not want family/friends to know the existence of the secret beneficiary
- An agreement is made between testator and purported trustee as to the use of the money. The testator then leaves the money to the secret trustee in the will
- Potential for Conflict
- Testamentary law / S.9 Wills Act 1837/Trusts Law
Elements of Full Secret Trust – requirements
Ottaway v Norman 1972:
- Intention of the Testator to impose a trust on the purported trustee.
- Communication of the terms of the trust to the trustee. – testator must communicate to the trustee that they property is to hold
- Acceptance by the trustee of the terms of the trust. - agree to the terms
- Testator relied on the trustee’s promise by making the disposition in favour of the trustee.
elements of full secret trust - intention
- Intention:
* Intention to make a trust by imposing obligation on the purported trustee.
* Three Certainties (intention, subject matter and object).
o Kasperbauer v Griffith 2000 (“it’s up to her to do what she wants with the house”)
o Re Snowden 1979 (“she’ll know what to do”)
elements of full secret trust - communication
- Terms of the trust must be communicated to the purported trustee BEFORE the Testator’s death
- It is NOT essential Trustee knows identity of the Beneficiary or the specific terms at the time of the communication (Re Keen’s Estate 1937) but Trustee must be aware before Testator’s death that the communication is of a trust (Walgrave v Tebbs 1855)
Elements of Full Secret Trust- acceptance
- Purported trustee must ACCEPT the terms of the secret trust before Testator’s death.
- This can be express (oral or in writing), by silence or acquiescence
Elements of Full Secret Trust - reliance
The testator relied on the trustee’s promise by making the disposition in favour of the trustee
Requirements of Half Secret Trusts: (Blackwell v Blackwell 1929)
- Intention to make a trust
- Communication of the identity of the Beneficiary and the terms of the trust BEFORE the will is executed. There must be nothing in the will that would suggest future communication (Re Keen’s Estate 1937; Johnson v Ball 1851)
- Acceptance by the trustee BEFORE will is executed (Re Bateman’s WT 1970)
- The will must state that T holds the property as trustee and MUST indicate that the identity of the beneficiary has been communicate to him
