Secret Trust

Question 1

Types of Secret Trust

What is a fully secret trust?

Answer 1

Fully Secret Trust: X makes gift to Y in will without expressly stating that Y is to hold it on trust.

(a) If existence of the arrangement can’t be proven on balance of probability, Y takes absolute interest
(b) If existence proven: (i) Y ordered to hold it on RT for X’s estate or (ii) Y ordered to hold on trust for Z

Question 2

Types of Secret Trust

What is a Half-Secret Trust?

Answer 2

Half Secret Trust: Will says Y is to hold the prop on trust but neither terms of it/identity of ben disclosed
 X leaves the property ‘to Y on trust, to be used in the manner which I indicated to him’
 No question of Y getting absolute interest. One of the options in (b) occurs instead.

Question 3

Requirements

Ottoway v Norman [1972] set out the 3 essential elements of the secret trust:

Answer 3

(i) Intention of the testator to subject the primary donee to an obligation in favour of the secondary donee
(ii) Communication of the intention to the primary donee
(iii) Acceptance of that obligation by the primary donee either expressly or by acquiescence

Question 4

Requirements - Intention

McCormack v Grogan [1869]

Answer 4

• T made will, then told D (beneficiary under will) of letter containing additional instructions. T didn’t expressly request D to comply strictly w instructions. P was named as beneficiary in the letter.
• Letter also said ‘I don’t wish you act strictly to the sections, leave it entirely in your good judgment’
• Held testator hadn’t intended to impose a trust obligation on D. G entitled to the gift

Question 5

Requirements - Communication - Testator must communicate his intention to create a trust to the secret trustee

Wallgrave v Tebbs [1855]

Answer 5

If no such communication, secret trustee takes property beneficially as his conscience is not affected by the trust when will becomes effective:

• T appeared to leave property to 2 people in will beneficially. Before death, asked executor to write to them informing them of way property should be applied. Executor wrote letter but never sent it.
• Held 2 people took property beneficially as testator’s intention was never comm. Secret trust failed.

Question 6

Requirements - Communication - Testator must communicate the terms of the trust to the secret trustee

Re Boyes [1884]

Answer 6

• T communicated intention to create secret trust to a secret trustee who agreed in principle. Terms didn’t come to light til after death when letter found.
• Held the secret trustee held the property on a resulting trust for the testator’s estate.
• If at T comms intention to create a ST + trustee accepts but terms not comm: RT for T’s estate

Question 7

Requirements - Communication - Testator must communicate the terms of the trust to the secret trustee

Re Keen [1937]

Answer 7

• T directed legacies to certain persons was to be held on trust + disposed of as may be notified by me during my lifetime. Before will executed, T gave envelope to trustee. Said don’t open til after death.
• Enveloped contained name of beneficiary: held not sufficient communication. The Half-ST failed.

Question 8

Requirements - Communication - Communication must have taken place during the testator’s lifetime

McCormack v Grogan [1869]:

Answer 8

Doesn’t have to have occurred before T made will. This is bc the fact that T
didn’t change his will after comm w secret trustee = making will in reliance of promise by secret trustee

Question 9

Requirements - Acceptance

Ottaway v Norman [1972]:

Answer 9

Acceptance of a trust obligation can be inferred from a secret trustee’s silence

Question 10

Communication and Acceptance - Variation of the Terms of a Secret Trust

Re Cooper [1939]

Answer 10

Held if T increased the sum in a secret trust after comm and acceptance had already
taken place for original sum, then he must comm with the secret trustee again and trustee must accept this.

Question 11

Communication and Acceptance - Where there are two or more Secret Trustees

Re Stead [1900] NB

Answer 11

If 2+ trustees, must T communicate with all? Depends on capacity in which trustees hold the property:
(i) If hold as tenants in common and T only comms with one, only that secret trustee is bound by trust.
• If 2 trustees, only one will be bound by the ST and the other will be entitled to take beneficially.
(ii) If hold as joint tenants and T only comms with one before will executed, all secret trustees bound
(iii) If hold as joint tenants and T only comms with one after will executed, only that trustee is bound
• If 2 trustees, only one will be bound by the ST and the other will be entitled to take beneficially.

Question 12

Communication and Acceptance - Where there are two or more Secret Trustees

Geddis v Semple [1903]

Answer 12

• Fully secret trust. T left properties to 3 legatees as TICs, but only one by T before death that the props were intended to create a secret trust for charitable purpose. Held the gift to the one who knew of his wishes failed, while the other tenants in common who knew nothing became beneficially entitled.
• But ‘innocent’ TIC may be bound to ST if T induced to make the gift by the undertaking of the co-tenant.

Question 13

Communication and Acceptance - Half Secret Trusts

Riordan v Bannon [1876] Ireland

Answer 13

• For there to be a Half-ST: when, at the time of making will, T formed an intention that a legacy be disposed by a legatee in a certain manner, not disclose, but communicated to the legatee and assented to by him at, before or after making the will, the court will allow trust be proved by parol evidence
• We do not follow the English rule on this as set out in…

Question 14

Communication and Acceptance - Half Secret Trusts

Blackwell v Blackwell [1929] UK

Answer 14

For half-ST, comm + acceptance must happen at or before will executed (UK)

Question 15

Communication and Acceptance - Half Secret Trusts

Prendiville v Prendiville [1995]

Answer 15

• T left property to wife ‘to be used by her according to my wishes as she has been advised’. Wasn’t clear if he had comm w wife or not before the will was executed. Wife died intestate.
• Beneficiary under original instruction sought to enforce the half secret trust.
• HC (Barron J) adopted Re King’ Estate [1888] as adopted in Re Browne [1944]: Half-ST valid if it is communicated + accepted at, before or after will is executed.
• Held King’s Estate + Browne are authority for the proposition that there is no difference in the law applicable to fully-STs and half-STs.
• This means the rule on communication in Re Stead applies to half-STs:
  (i) If hold as tenants in common and T only comms with one, only that secret trustee is bound by trust.
  • If 2 trustees, only one will be bound by the ST and the other will result in RT for T’s estate.
  (ii) If hold as joint tenants and T only comms with one before will executed, all secret trustees bound
  (iii) If hold as joint tenants and T only comms with one after will executed, only that trustee is bound
  • If 2 trustees, only one will be bound by the ST and the other result in RT for T’s estate.
  Biehler says “while it’s unfortunate the SC wasn’t given opportunity to further clarify the issues, it confirms in Ireland it’s permissible for comm + acceptance of half-ST to take place after execution of will but during
  testator’s lifetime as long as it doesn’t contradict the terms of the will”.

Question 16

Inconsistency

Re Keen [1937]:

Answer 16

T directed legacy ‘as may be notified by me’, envelope, sufficient comm. Lord Wright noted the inconsistency bw what in fact happened i.e. communication took place before will executed and
the express terms of the will, which provided for a future definition of the trust’s terms.

Question 17

Intestate Succession

General rule?

Answer 17

ST can also arise where person doesn’t make a will on the faith of a promise by
his intestate successor that they will hold the property on trust.

Question 18

The Nature of the Beneficiary’s Interest

S.82 Succession Act 1965

Answer 18

If person attests a will then anything owing to them under the will is null+void

Question 19

The Nature of the Beneficiary’s Interest

Re Young [1951]:

Answer 19

The ben’s interest doesn’t arise by virtue of the will but dehors the will i.e. outside the will by virtue of ST
T left estate to wife leaving ‘such legacies as I wish to be made’. Told her to give 2k to his
chauffeur. But his chauffeur had attested the will. This didn’t matter – upheld ST as dehors the will.

Question 20

Where the Secret Trustee Predeceases the Testator

Re Maddock [1902]:

Answer 20

The ben’s interests are dependent on the validity of initial testamentary disposition. If
T makes gift in will intending legatee hold on trust for other + legatee predeceases, legacy + thus ST fails

Question 21

Where the Beneficiary Predeceases the Testator

Re Gardner [1923

Answer 21

If the ben predeceases the T, his heirs will take the interest in the ST on the T’s death provided the ben was alive at the time the undertaking to enforce the trust was taken by the legatee.