Secret & Half Secret Trusts Flashcards

1
Q

Where would you usually find a secret/half-secret trust?

A

Only exists in wills

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2
Q

What was the purpose of a trust of this nature historically?

A

Used to provide for a mistress or child born out of wedlock

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3
Q

What is a secret trustee known as?

A

Either a trustee, or in the case of a full secret trust an ‘ostensible beneficiary’

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4
Q

What was set out in McCormack v Grogan?

A
  • Where a person either expressly promises or by his silence implies, that he will carry out the testator’s intentions into effect, and the property is left upon the faith of that promise or undertaking, it is in effect a case of trust
  • Trustee expressly or implicitly agrees to do as asked by testator in life
  • But the trust or part of it is left unrevealed in the text of the will
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5
Q

What is the problem with creating secret/half-secret trusts?

A

They must comply with the requirements for wills to be valid in accordance with the Succession Act 1965.
If the trust is not expressly set out in the will, it could be argued that it does not comply with these requirements.

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6
Q

What happens if a secret trust fails?

A

The intended secret trustee could take the property absolutely
or
Intended secret trustee could hold the property on resulting trust for the testator’s estate.

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7
Q

Why recognise secret trusts?

A
  1. Equity will not allow a statute to be used to create a fraud
  2. ‘Dehors the will’ (outside the will): argument that the secret trust is not subject to succession act as details agreed outside the will.
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8
Q

How does a (fully) secret trust appear in the will?

A

The fully secret trust will appear as a gift to the beneficiary in a will.
(e.g. ‘My house to Sophie’ might be written in the will, but in reality the testator intends Sophie to keep the house for someone else, has communicated this to her in life and has obtained her assent to this. Although Sophie appears as a beneficiary, she is in fact a secret trustee)

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9
Q

What are the elements of a secret trust as per Lord Westbury in McCormack v Grogan?

A
  1. Intention to create a trust must be present
  2. The testator must have communicated this fact to the secret trustee in life
  3. The secret trustee must have agreed to this (implicitly or expressly) in life
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10
Q

Which case re-affirmed the requirements for a secret trust?

A

Blackwell v Blackwell

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11
Q

What different element was set out in Ottaway v Norman?

A

Could be accepted expressly or by acquiescence

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12
Q

What happened in Cullen v Attorney General for Ireland?

A
  • A gift was set out in the will but intended to be held on secret trust by the recipient for the benefit of a charity.
  • A gift to a charity in a will would have been exempt from certain taxes.
  • The court held that these taxes were payable here as if the recipient were keeping the gift for themselves.
  • This was justified on the basis that the trust had taken effect outside of the will.
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13
Q

Can a beneficiary witness the will?

A

Yes

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14
Q

Why can a beneficiary witness the will?

A
  • Ordinarily under s 82 of the Succession Act 1965, a beneficiary will lose their interest to any gift under a will if they witness it.
  • But as the secret trust is viewed as outside the will, a beneficiary to such a secret trust may witness the will and keep their interest.
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15
Q

What was the decision in O’Brien v Condon?

A

It was found that the beneficiary could benefit from the secret trust despite witnessing the will

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16
Q

Can a named legatee/devisee witness the will?

A

It appears so (Re Armstrong)

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17
Q

What happened in Re Young?

A

The testator left property to his wife with the stipulation that she should use it to make certain bequests that he had previously informed her about (half secret).
One of these bequests was to go to the testator’s chauffeur (a sum of £2000).
The chauffeur had witnessed the will.
Therefore, if the gift had been expressly disclosed in the will, the chauffeur would not have been able to benefit.
However, as the trust took effect outside the will, the chauffeur could receive the £2000.

18
Q

What happens if the ostensible legatee/devisee dies before the testator?

A

The trust will fail (Re Maddock)

19
Q

What happens if the trustee dies before a testator in a half-secret trust?

A

The trust will survive if the purposes were known (Prendiville v Prendiville)

20
Q

What the courts decide in Brown v Pourau (NZ)?

A

Communication by testator in life viewed as key element. Acceptance could be inferred by silence.

21
Q

What 1902 Irish case set out that acquiescence or silence could amount to acceptance?

A

French v French

22
Q

When should communication be made?

A

During the testator’s lifetime

23
Q

Explain the decision in Re Boyes?

A

Objects of trust not specified to secret trustee during life of testator and therefore the trust failed
but (obiter)
‘It may possibly be that the legatee would be bound if the trust was put in writing and placed in his hands in a sealed envelope, and he had engaged that he would hold the property given to him by the will upon the trust so declared although he did not know the actual terms of the trust.’

24
Q

What happened in Re Stead?

A

The tenant in common to whom the trust information was communicated is bound by it; the other is not and may take their share independent of the trust.

25
Q

What did Re Stead say in relation to joint tenants?

A
  • Distinction made between whether the promise of one joint tenant was made before the will or after the will was executed.
  • Before the will executed: If communicated to one during life before the will executed , both tenants are bound by the trust.
  • After the will executed: If communicated to one during life after the will was executed, only the joint tenant informed of the trust is bound by it.
  • This approach has been criticised as unnecessary.
26
Q

What does Biehler say about a half-secret trust?

A

‘A half secret trust arises where a testator leaves property to an individual in a will and expressly directs that this individual is to hold the property on trust without specifying the terms of the trust’.

27
Q

What was the initial stance on half-secret trusts?

A
  • More difficult to reconcile with lack of compliance with will formalities as the existence of a trust is apparent in the will.
  • Initially, reluctance in England to recognise these trusts.
  • Initially, same approach in Ireland but this changed with Riordan v. Banon (1876).
28
Q

What happened in Riordan v Banon?

A
  • Refusal to acknowledge half-secret trusts would undermine the intention of the testator
29
Q

What happened in Re Watters’ Will Trusts?

A
  • The will set out that the testator’s property should be used for ‘charitable purposes and objects known to my executors’.
  • Was this sufficiently made known to the executors?
  • During his life, but after execution of the will, the testator had several general discussions with one of his executors about how he wished his assets to be used after death and left a memo setting this out in detail found after he died. These discussions were found not to be specific enough to constitute communication before death. There was no trust.
30
Q

What happened in Re King’s Estate?

A
  • There was no trust in this case. But Monroe J set out key principles in relation to when secret trusts arise.
    1. A testator cannot reserve to himself the right of declaring trusts by an instrument informally executed subsequent to the execution of his will. This would be to repeal the [then] statute of wills.
    2. If a testator at or before the execution of his will communicates to a person to whom he proposes to give a legacy that the legacy is given upon trust to be applied in a particular way, and if the legatee expressly or tacitly consents to take the legacy on these terms, the Court of Chancery will not permit him to be guilty of a fraud, but will compel the execution of the trust so communicated.
31
Q

As per Re King’s Estate, where do the rules apply?

A
  1. This rule applies whether the existence of the trust be indicated on the face of the will, or the legacy by the terms of the instrument be given absolutely.
  2. The rules applies when the communication is made subsequently to the execution of the will: Moss v. Taylor.
  3. It is essential to the creation of a valid trust that the communication should be made to the legatee in the testator’s lifetime, and that the legatee should not object to execute the trust.
32
Q

As per Re King’s Estate, when is there a valid trust where the bequest is to two or more legatees?

A

If the bequest be to two or more legatees, a valid trust is created if the communication be made to any one of them, before or at the time of the execution of the will. If the communication be made after the execution of the will, it must be made to all the legatees on whom the trust is sought to be imposed.

33
Q

The terms in which the trust is expressed must not be vague or uncertain. True/False?

A

True (Re King’s Estate)

34
Q

What happened in Re Browne?

A

In this case a fully secret trust was found due to lack of information re trust in the will. However, Overend J stated obiter, that even if the trust was a half-secret trust, the fact communication had taken place after the execution of the will would have made no difference.

35
Q

What is the English stance?

A
  1. Took a long time for half-secret trusts to be recognised
  2. Communication has to be before the execution of the will
36
Q

What happened in Blackwell v Blackwell? (Eng)

A
  • Testator gave money on trust to legatee with the instruction to apply the income ‘for the purposes indicated by me to them’. Instructions were given to one legatee and accepted in outline by the rest before the execution of the will.
  • Viscount Summer: ‘ it is communication of the purpose to the legatee, coupled with acquiescence or promise on his part, that removes the matter form the provision of the Wills Act and brings it within the law of trusts.’
37
Q

What happened in Re Keen? (Eng)

A
  • Before the execution of the will, one of the trustees was given a sealed envelope with name of beneficiary which was deemed to constitute communication.
  • However, as the phrase in the will suggested that notification would take place after execution, this was not sufficient.
38
Q

What was decided in Re Bateman’s Will Trusts?

A
  • Communication and acceptance of half secret trust must occur before the execution of the will.
  • Approved obiter in Re Freud (2014).
39
Q

What was decided in Canada regarding communication?

A

Communication of the trust even very shortly after the will was made would cause a half-secret trust to fail. (Jankowski)

40
Q

Explain Prendiville v Prendiville

A
  • Estate left to wife in will ‘ to be used by her according to my wishes- as she has been advised’.
  • Before he died the testator set up a document with instructions on how his wife was to deal with the property in her own will.
  • Wife made a statutory declaration that the instructions she received from her husband had been communicated and accepted by her before she died. It was not clear if this had happened before or after the execution of the will.
  • Wife left no will so a dispute arose between her next of kin and the purported beneficiary to the half secret trust.
  • Barron J held that it did not matter at what time the communication took place and a valid half secret trust subsisted.