Secret Trusts Flashcards
Re Snowden
Ratio: Burden of proving a secret trust exists is on the person claiming it does. The standard is ‘on the balance of probabilities’.
Kasperbauer v Griffith
Ratio: Sets out requirements for a valid secret trust: 1. Intention by testator to create trust (three certainties). 2. Communication of trust to intended trustee. 3. Acceptance by trustee. 4. Reliance on this by settlor - e.g. creating a will, leaving a will unrevoked or deliberately not making a will. A constructive trust will be imposed to compel a secret trustee to hold trust property as had been agreed with the testator, thereby preventing fraud.
Facts: The testator’s statement that his wife ‘knows what she has to do’ was held to be too vague to create a secret trust.
Marguiles v Marguiles
Ratio: Example of a statement being too vague to create a secret trust.
Facts: A father’s ambiguous statements about the claimant’s older brother ‘knowing his wishes’ and ‘giving what’s appropriate’ were held not to create a binding legal obligation.
Wallgrave v Tebbs
Ratio: The existence of a fully secret trust can be communicated any time before the testator’s death.
Facts: Instructions to hold on charitable trusts were not communicated to legatees, but were doing amongst the testator’s papers after his death. No valid trust was created as the legatees had not been informed of the testator’s intentions in his lifetime.
Re Boyes
Ratio: The terms of both fully secret and half secret trusts must be communicated.
Facts: Property was left to the testator’s solicitor, who had agreed to hold it on the tweets he would receive. The testator did not, as promised, give instructions to the solicitor on how the property was to be held. Details were found after the testator’s death in two unattested documents. Held that there was a resulting trust to the testator’s estate as the trust had not been properly communicated.
Re Colin Cooper
Ratio: The property subject to a trust must be communicated for both HSTs and FSTs.
Facts: The testator left £5000 to two people and communicated the terms of the trust to them. He later increased the sum to £10,000 but did not communicate this to the intended trustees. Held that only the initial £5,000 was subject to the trusts, the other £5,000 was held on resulting trust.
Re Keen
Ratio: There will be sufficient communication if the terms are given to the intended trustee in the settlor’s lifetime, enclosed in a sealed envelope to be opened after the testator has died as long as the trustee is aware that the envelope contains terms and accepts on that basis. For HSTs, the sealed envelope must be given before or at the same time as communication of the will.
Re Stead
Ratio: Only trustees to whom communication is made are bound. Unless the gift is to joint tenants, who are all bound if communication to at least one took place before the execution of the will.
Note - Perrins has suggested the necessary question is: was the settlor’s gift to the multiple secret trustees induced by one of the trustees’ promise to carry out the secret trust? If so, all secret trustees are bound.
Ottaway v Norman
Ratio: 1. There must be acceptance to create a secret trust. 2. The obligation of a secret trust can be to make a will in favour of the secret beneficiary. 3. An oral disposition of land not evidenced by signed writing is allowed under a secret trust - suggests that secret trusts are constructive trusts and so exempted by s.53(2) LPA from s.53(1)(b) LPA.
Facts: Testator left his freehold bungalow to his housekeeper. It was agreed that she would devise the bungalow by her will to the testator’s son. She failed to do this. The court held that the son was entitled to the bungalow on the basis that the obligation was imposed and accepted and the means of carrying out the obligation was immaterial. The court enforced this trust despite the fact it was declared without any writing.
Moss v Cooper
Ratio: 1. Acceptance can be implied from silence or acquiescence. 2. Reliance can be demonstrated by leaving the will unrevoked.
Stockland v Aldridge
Ratio: Acceptance can be demonstrated by refraining from making a will.
Blackwell v Blackwell
Ratio: 1. Dehors the will theory: Secret Trusts operate outside the will, since communication and acceptance are inter vivos, and so are not subject to the Wills Act. 2. If a HST trustee pre-deceases the settlor, the trust still subsists because ‘equity will not allow a trust to fail for want of a trustee’.
Facts: By codicil, £12,000 was left to five people to be applied ‘for the purposes indicated by me to them’. The terms of the trust were communicated before the codicil was executed. HoL held that the trust was enforceable. Held that failure to carry out the settlor’s wishes which the trustee had agreed to do was fraud.
Viscount Sumner: ‘It is communication of the purpose to the legatee, coupled with acquiescence or promise on his part that removes the matter from the provision of the Wills Act and brings it within the law of trusts’.
Issue: Secret Trusts are constituted via the settlor’s will and so are more like a testamentary trust. The will does not create the trust, it is the device for constituting it.
Note - discuss this theory when a FST beneficiary or trustee witnesses a will.
Re Bateman’s Will Trusts
Ratio: A HST will fail if the will allows for future communication.
McCormick v Grogan
Ratio: The fraud theory - equity will not allow fully secret trustees to use the strict requirements of the Wills Act 1837 to keep the property but will ensure that they hold it on trust.
Note: discuss when discussing trusts of land.
Also - this theory is not as applicable to HSTs because they are clear that a trust is to be created.
Re Gardner (No 2)
Ratio: A secret beneficiary obtains an interest in property when the will is executed - if the beneficiary pre-deceases the settlor, they will still have the interest.
Facts: The secret beneficiary pre-deceased the settlor. Normal rule is that a testamentary trust fails if the beneficiary pre-deceases the settlor. The court held that the beneficiary’s interest was created by agreement, not the will and so arose as soon as the trusts were communicated and accepted. Thus, the beneficiary’s share did not lapse upon their pre-deceasing the settlor.
Note: This decision is regarded as extremely dubious since the trust is not properly constituted until the settlor’s death. SHOULD NOT BE FOLLOWED.
