Secret Trusts

Question 1

What is needed for a secret trust?

Answer 1

[Ottaway v Norman, Brightman J]
1. Intention to create trust
[Kasperbauer v Griffith, Peter Gibson J: Need all 3 certainties]

2. 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]
3. Acceptance of trust by legatee expressly or by acknowledgement/acquiescence

Question 2

[ESSAY] Why have a secret trust?

Answer 2

1. 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’
2. 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.’]
3. Dehors the will theory: Half-/secret trusts are actually inter vivos trusts, constituted on S’ death
   [Viscount Sumner proposed]
   [Blackwell v Blackwell, Lord Warrington]

Question 3

What is the fraud theory?

Answer 3

• 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

Question 4

What is the de hors the will theory?

Answer 4

• 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

Question 5

What is a fully secret trust?

Answer 5

S leaves property to T intending T to hold on trust for B, but NO INDICATION of such an intention

Question 6

When must communication take place for a fully secret trust?

Answer 6

• 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]

Question 7

How must trust terms be provided for fully secret trusts?

Answer 7

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]

Question 8

Re Boyes

Answer 8

[T AND S AGREED ON EXISTENCE OF TRUST PRE-DEATH, BUT Bs ONLY REVEALED IN LETTERS FOUND AFTER S’ DEATH = NO TRUST]

Question 9

Wallgrave v Tebbs

Answer 9

[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’]

Question 10

What if a fully secret trust fails?

Answer 10

Legatee can get the property absolutely
[Wallgrave v Tebbs]
[Proby v Landor]

Virgo: Unless T does not know of trust?

Question 11

What is a half secret trust?

Answer 11

S leaves property to T ‘on trust’ for B, where B is not identified

Question 12

When must communication take place for a half-secret trust?

Answer 12

• 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]

Question 13

Re Keen

Answer 13

[Ts REFERRED TO AS ‘SUCH PERSONS AS MAY BE NOTIFIED BY ME’ IN WILL = S WANTED TO DECIDE LATER = NO TRUST BECAUSE INCONSISTENCY]

Question 14

Why are the requirements for half secret trusts stricter?

Answer 14

Blackwell: Prevents S from reserving power to change will informally
(WIDELY CRITICISED POSITION)

Question 15

What if a half secret trust fails?

Answer 15

T holds property on RT for S’ estate

[Re Freud: Son attempted this argument]

Question 16

Can a witness to a will be a T?

Answer 16

If half-secret trust, yes because he is not a B on the face of the will
[Cresswell v Cresswell]

Question 17

Re Stead (1900)

Answer 17

Communication to one joint tenant before will execution will bind the other

Question 18

Can a witness to a will be a B?

Answer 18

1. If he appears as B on will, no
   [s 15 Wills Act 1837]
2. If he is a half-/secret B, yes
   [Re Young]

Question 19

What if a B predeceases a S?

Answer 19

1. Share of deceased B passes to B’s personal representative
   [Re Gardner (No 2); VERY DISAPPROVED IN TEXTBOOKS]
2. RT to S’ estate

Question 20

What about excess property left to Ts on fully or half-secret trust?

Answer 20

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]

Question 21

[ESSAY] Arguments against fraud theory?

Answer 21

1. 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
2. Not sensible in half-secret trusts
3. Loopholes, like how acceptance can be made by silence when T never heard, can be unfair to Ts

Question 22

[ESSAY] Arguments against dehors the will theory?

Answer 22

1. S 1 of Wills Act 1837 applies to ‘any testamentary disposition’ which can include secret trusts
   [Critchley (1999)]

Question 23

In fully secret trust, what is T dies before S?

Answer 23

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]