Secret Trust

Question 0

Two types of secret trust

Answer 0

• Fully secret

* Half secret

Question 1

Secret trusts

Answer 1

Operate dehors the will.

Question 2

Secret trusts arise

Answer 2

When a testator wishes to benefit someone not mentioned in the will.
Testator to confidant who receives a gift under will for own benefit BUT actually to be held by C for 3rd person who can’t be named in will.

Question 3

Wills Act 1837: S9

Answer 3

Secret trusts operates ‘dehors the will’ and in contravention of the Act.
As a result of the Act only those identified in a properly executed will shall be entitled to testator’s property.

Question 5

McCormick v Grogan (1869)

Answer 5

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Question 6

Ottaway v Norman (1972)

Answer 6

O left bungalow and contents to Miss Hodge
Done on proviso that she would dispose of property in favour of O’s wife and kids.
H failed to do so and left property by own will to N.
Plaintiff brought actions against H claiming existence of secret trust.
Court held bungalow residuary estate passed to plaintiff as H acquiesced.

Question 7

Ottaway v Norman - 3 step test for fully secret trust

Answer 7

1) Must be an intention to benefit the claimant - beneficiary.
2) Communication of intention to intended secret trustee.
3) Acceptance by secret trustee of obligation.

Question 8

Kasperbauer v Griffith (2000)

Answer 8

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Question 9

Fully Secret Trust

Answer 9

Not referred to at all in the will with no mention being made in the will as to the reason why the property is being left to that secret trustee.

Often very difficult to prove the existence of a fully secret trust, unless the testator had mentioned the detail of the arrangement to somebody else.

Question 10

Half secret trust

Answer 10

Existence of trust is mentioned in will but not the terms.

Question 11

Creating a valid fully secret trust

Ottaway v Norman 1972 3 step test

Answer 11

1) Intention to benefit the claimant-beneficiary.
2) Communication of that intention to the intended secret trustee.
3) Acceptance by the secret trustee of that obligation.

Question 12

Wallgrave v Tebbs (application of Ottaway)

Answer 12

Wood VC holds that where the secret trust-legatee expressly promises or by silence implies that he is accepting the obligation requested of him by the testator then he will be bound by that obligation.

Question 13

1) Intention to benefit

Answer 13

Settlor of secret trust must intend that the legal titleholder of property under a will be trustee of that for another.

Question 14

Re Snowden

McCormick v Grogan

Answer 14

Snowden: elderly woman unsure how to deal with proeprty upon her death, so left proeprty to elder brother with the words ‘he shall known what to do’.
-brother died two days after. Did she impose a secret trust in favour of her niece and nephews.
Megarry held that the deceased woman had only intended to impose a moral obligation on him- therefore the property passed beneficially on the terms of her brothers will.

McCormick: Grogan contracted cholera and in the days leading up to his death he called for McCormick with the words ‘i do not require you to act in accordance with the foregoing instructions but rather I leave it entirely to your judgement to do as you think I would do if I was still living.
Claimant considered himself to be overlooked and sought a declaration that he had a right under a secret trust in certain property.
House of Lords held that the testator had not intended to impose a trust obligation on Grogan.
There was no secret trust under which Grogan could claim a benefit.

Question 15

Communication of the Secret Trust

Answer 15

Where the settlor intends to create a secret trust it is important that this intention is communicated to the trustee and that the terms of the secret trust are similarlity communicated to her.

Question 16

What must be communicated?

Answer 16

Depends on the nature of the property and the testator’s intention.
If the secret trustee is entitled to take as bare trustee and hold a single item of property on trust for the beneficiary there is no need for communication of the testator’s intention for that property.

-however if more than one intended beneficiary, the identity of those beneficiaries and the manner in which the property is to be distributed between them would need to be communicated.

Question 17

Ottaway v Norman scenario of communication

Answer 17

Where the secret trustee is entitled to use trust property during their lifetime provided that she left the property to specified beneficiaries in her will.
-necessary for the precise terms of the trust to be communicated to the secret trustee.
The settlor must communicate both the existence of the secret and as many terms of the trust as are necessary in the context.

Question 18

Re Boyes

Answer 18

Boyes: testator informed the intended trustee that he meant to leave property to him under a secret trust arrangement.
Testator also informed the intended trustee that the terms would be communicated to him before the testator’s death.
However the terms were not communicated.
Post death two unattested letters were found amongst the testator’s possessions, claiming that the purpose of the trust was to provide for his mistress and illegitimate trust.
Held that the two documents were not proof enough to enforce secret trust.
Perhaps a decision reflecting the time in which it was made.

Question 19

Moss v Cooper

Re Batemans Wills Trust

Answer 19

The communication of both the intention and the terms requires that the trustee must be able to know with sufficient certainty before the death of the testator.

Question 20

Communication occurring after the will:

Answer 20

Fully secret trust if communication occurs after the will, the trust will fail and the legatee will hold on resulting trust for the residuary estate.
Re Keen

Question 21

Wills Act 1837 + Equity

Answer 21

Equity holds that a secret trust will be valid, so long as properly created.
Equitable rationale being that a ST is a doctrine which seeks to provide justice in circumstances in which a literal application of the Wills Act would permit unconscionable behaviour

Question 22

Acceptance of obligations

Blackwell v Blackwell

Answer 22

Lord Sumner: he tells the proposed donee of this intention and either by express promised or by the tacit promise which is satisfied by acquiescence, the proposed donee encourages him to bequeath the money on the faith that his intentions will be carried out’

Question 23

Equity and the Wills Act 1837

Re Young

Answer 23

Re Young: a secret trust was referred to in the will.
Terms of that trust being that the chauffeur would receive a legacy.
Formal difficultly being that the chauffeur had witnessed the will and therefore ought to have been precluded from taking benefit under that will within s15 of WA.

It was held that the chauffeur could take validly in accordance with the terms of the secret trust as the Wills Act has

Question 24

Trustee dies before the settlor

Answer 24

Fully secret trust: trust would fail because the deceased secret trustees personal representatives would not know of the trust and therefore unable to carry it out.

Half secret trust: will be possible for the deceased secret trustees personal representatives to know of the existence of the trust.
Trust should not fail because of want of a trustee.

Question 25

Half secret trusts

Answer 25

Arises where the testator leaves property to a named person in a will to hold on the trusts that have been or will be declared

Question 26

Blackwell v Blackwell

Answer 26

Half secret trust is an express trust declared by the testator in his or her will.
The trust should be valid only where the terms of the trust have been communicated to the trustee, either before or after the will was executed in circumstances under which the trusteeship or by acquiescing, can be assumed to have accepted the trusteeship.

It will then be unconscionable for the trustee to break this undertaking once the trust has been constituted by transfer or property to the trustee after the testator’s death.

Question 27

Secret trusts of non-testamentary applications.

Answer 27

Although a fully secret trust can arise only in the testamentary context the principles recognised in the secret trusts cases have been applied to transactions outside of wills.

Question 28

Secret trusts- reasons for recognising them.

Answer 28

Recognised to prevent trustee from acting unconscionably in avoiding his or her his or her undertaking to the testator to hold property on trust for another- to avoid fraud.