Secret Trusts Flashcards
1. Concept of secret and half-secret trusts 2. Relevant law and information to determine creation of full/half secret trust
What is needed for a secret trust?
[Ottaway v Norman, Brightman J]
1. Intention to create trust
[Kasperbauer v Griffith, Peter Gibson J: Need all 3 certainties]
- Communication of trust terms to legatee
[Re Keen: For half-secret, must be before creation of will; OR communication must adhere to terms of will]
[Moss v Cooper: Silence can mean consent; communication can be made by S’ representative] - Acceptance of trust by legatee expressly or by acknowledgement/acquiescence
[ESSAY] Why have a secret trust?
- Historical reasons: Secret trusts are theoretically unjustifiable but might just might be a pragmatic concession
• Watt: Secret trust allowed gentlemen to provide for their illegitimate children/mistress
• Webb and Akkouh: Should scrap secret trusts if there is no satisfactory justification for them
• Meagher’s 2003 survey: Secret trusts still being used, but sometimes for purposes outside of what is intended by courts, e.g. hiding assets from State
• Mitchell 2010 definition captures this secrecy: those who ‘do not want their testamentary wishes to become public’ - Fraud theory: To stop Ts from taking property when not meant to
[Thynn v Thynn, Guildford LC]
[McCormick v Grogan, Lord Westbury: ‘the jurisdiction which is involved here is founded altogether on personal fraud.’] - Dehors the will theory: Half-/secret trusts are actually inter vivos trusts, constituted on S’ death
[Viscount Sumner proposed]
[Blackwell v Blackwell, Lord Warrington]
What is the fraud theory?
- Original explanation for secret trusts involving Equity
- Cannot allow legatee to benefit from bequest BUT cannot use statute for fraud
- DOES NOT ADDRESS HALF-TRUSTS: No danger of Ts benefitting even if no trust upheld, as property returns to S’ estate
What is the de hors the will theory?
- Trust operates entirely outside of the will (i.e. secret trust is an express inter vivos trust declared during S’ life and fully constituted when property vests in Ts post-death) and not actually ignoring the formalities
- Some support in Blackwell; Re Young; and Re Snowden (Megarry VC): Secret trusts’ whole basis is that they operate outside the will
- DOES NOT ADDRESS problem of no apparent intention of inter vivos trust
What is a fully secret trust?
S leaves property to T intending T to hold on trust for B, but NO INDICATION of such an intention
When must communication take place for a fully secret trust?
• Communication of trust to legatee and of legatee’s acceptance must occur BEFORE S’s DEATH but BEFORE OR AFTER WILL IS MADE
[Re Freud]
[Re Colin Cooper: Changes as well, otherwise extra sum on RT for S’ estate]
[Moss v Cooper: Silence can mean consent; communication can be made by S’ representative]
How must trust terms be provided for fully secret trusts?
Can be in sealed form IF T is aware and accepts that it contains terms of the trust to be revealed later
[Re Boyes]
[Wallgrave v Tebbs]
Re Boyes
[T AND S AGREED ON EXISTENCE OF TRUST PRE-DEATH, BUT Bs ONLY REVEALED IN LETTERS FOUND AFTER S’ DEATH = NO TRUST]
Wallgrave v Tebbs
[LETTER FOUND POST-DEATH INDICATING S’ INTENTION TO HOLD PROPERTY ON TRUST WITH NO PRIOR COMMUNICATION = NO TRUST]
[T CAN ACCEPT TRUST OF BY SILENCE HE IMPLIES ‘THAT HE WILL CARRY THE TESTATOR’S INTENTION INTO EFFECT’]
What if a fully secret trust fails?
Legatee can get the property absolutely
[Wallgrave v Tebbs]
[Proby v Landor]
Virgo: Unless T does not know of trust?
What is a half secret trust?
S leaves property to T ‘on trust’ for B, where B is not identified
When must communication take place for a half-secret trust?
• Communication of trust to legatee and of legatee’s acceptance must occur BEFORE OR DURING WILL CREATION
[Blackwell v Blackwell: ‘purposes we have discussed’ acceptable to mean trust]
[Re Bateman’s WT: Post-execution communication soundly defeated]
• Trust must be consistent with words of the will, even with valid communication and acceptance
[Re Keen]
Re Keen
[Ts REFERRED TO AS ‘SUCH PERSONS AS MAY BE NOTIFIED BY ME’ IN WILL = S WANTED TO DECIDE LATER = NO TRUST BECAUSE INCONSISTENCY]
Why are the requirements for half secret trusts stricter?
Blackwell: Prevents S from reserving power to change will informally
(WIDELY CRITICISED POSITION)
What if a half secret trust fails?
T holds property on RT for S’ estate
[Re Freud: Son attempted this argument]
Can a witness to a will be a T?
If half-secret trust, yes because he is not a B on the face of the will
[Cresswell v Cresswell]
Re Stead (1900)
Communication to one joint tenant before will execution will bind the other
Can a witness to a will be a B?
- If he appears as B on will, no
[s 15 Wills Act 1837] - If he is a half-/secret B, yes
[Re Young]
What if a B predeceases a S?
- Share of deceased B passes to B’s personal representative
[Re Gardner (No 2); VERY DISAPPROVED IN TEXTBOOKS] - RT to S’ estate
What about excess property left to Ts on fully or half-secret trust?
Fully:
• Not settled law: T may bring evidence where possible that he was intended to be a B
[Re Rees’ WT: No extrinsic evidence allowed;
Re Tyler’s Fund Trusts: PennycuickJ found no reason for why not]
• Changes to will should be communicated, otherwise extra sum on RT for S’ estate
[Re Colin Cooper]
[ESSAY] Arguments against fraud theory?
- Stopping T from taking beneficially is itself not a reason for half-/secret trust being enforced in favour of Bs; just need RT in favour of S’ estate
• See it as fraud on Bs through their not receiving benefits?
[Blackwell v Blackwell]
• But reasoning appears circular
[Sheridan (1951)]
• [McCormick v Grogan]: Ambiguous as to what fraud should even be prevented - Not sensible in half-secret trusts
- Loopholes, like how acceptance can be made by silence when T never heard, can be unfair to Ts
[ESSAY] Arguments against dehors the will theory?
- S 1 of Wills Act 1837 applies to ‘any testamentary disposition’ which can include secret trusts
[Critchley (1999)]
In fully secret trust, what is T dies before S?
Secret trust will fail
[Re Maddock]
BUT court should appoint new T based on maxim of ‘Equity will not let a trust fail for want of trustees’
[Kincaid]
