Secret Trusts

Question 1

A secret trust

Answer 1

A trust which some or all of the terms of the trust are not apparent on the face of the will

Question 2

Secret trusts contravene the principles of the Wills Act and should be void

Answer 2

Equity has recognised the existence of Secret trusts and enforced them provided the relevant condition are met

Question 3

A Fully Secret trust

Answer 3

A trust which appears on the face of the will to be an outright gift

Question 4

A Half Secret trust

Answer 4

A trust which appears in the will as a trust with unnamed beneficiaries

Question 5

Rationale for enforcing Secret Trusts

Answer 5

Fraud Theory
- ST’s are upheld on the basis that ‘equity will not allow a statute to be used as an instrument of fraud’
Dehors The Will
- the trust is established ‘dehors’ (outside) the will, and is not a testamentary disposition.

Question 6

The Dehors will theory is widely accepted to be the basis for the courts’ enforcing secret trusts

Answer 6

Re Snowden

Question 7

The requirements of a secretat trust

Answer 7

Laid out in Kasperbauer v Griffiths

• Intention
• Communication
• Acceptance
• Reliance.

Question 8

ST: Intention

Answer 8

An intention by the testator to create a Trust.
- the rest of the three certainties must also be satisfied too
Kasuperbauer: his wife ‘knows what to do’ was insufficient
The intention can be seen either form the will or from communications outside the will
No communication: gift
Partial Communication: resulting trust

Question 9

ST: Communication

Answer 9

Communication of the trust to the intended trustee outside of the will (Re Keen)

Question 10

ST: Acceptance

Answer 10

Acceptance of the trust by the trustee

Question 11

ST: Reliance

Answer 11

Reliance by the testator upon the trustee’s acceptance.

Question 12

ST: Communication, when

Answer 12

Communication must take place any time before death (Wallgrave v Tebbs)

Question 13

ST: Communication, what

Answer 13

• Existence of the trust (Wallgrave v Tebbs)
• Terms of the trust (inc beneficiaries) (Re Boyes)
• The property subject to the trust (Re Collin Cooper) (this cannot be increased at a later date)
• Any additions to secret trusts must be communicated (Re Collin Cooper)

Question 14

ST: Communication, how

Answer 14

• Oral or writing
• If terms are in a sealed envelope to be opened after death, this will count as valid communication if the trustee is aware that the letter contains the terms and accepts on that basis (Re Keen)

Question 15

ST: Communication, who

Answer 15

Trustees

• Tenants in common: only one
• Joint tenants: all of them

Question 16

ST: Acceptance

Answer 16

Can be express (Ottaway v Norman)
Implied (Moss v Cooper)
Qualified acceptance counts as acceptance if relied on.
Moss v Cooper
- a trustee was held to have accepted when he said he would try to carry out the testator’s wishes as far as he could.

Question 17

ST: Reliance

Answer 17

The testator must act in reliance upon the trustee’s acceptance (Stickland v Aldridge)

Question 18

HST: Intention

Answer 18

The testator must clearly intend to create a trust.

Kasperbauer - insufficient

Question 19

HST: Communication, when

Answer 19

Must be before or at the same time as the execution of the will (Re Keen)
Any reference to a HST must also be consistent with the will (Re Keen)
The trust will fail if the will mentions future communication (Re Keen)

Question 20

HST: Communication, what

Answer 20

• Existence of the trust (Wallgrave v Tebbs)
• Terms of the trust (inc benficiaries) (Re Boyes)
• The property subject to trust (Re Collin Cooper) (Cannot be changed at a later date)

Question 21

HST: Communication, how

Answer 21

Same as for Fully Secret trusts

Question 22

HST: Communication, who

Answer 22

Same as for Fully Secret Trusts

Question 23

HST: Acceptance

Answer 23

• express (Ottaway v Norman)
• Implied from silence of acquiescence (Moss v Cooper)
• Qualified Acceptance (Moss v Cooper)

Question 24

Reliance

Answer 24

The testator must act in reliance upon the trustee’s acceptance (Stickland v Aldridge)

Question 25

What if a trustee or beneficiary also witnesses the will?

Answer 25

The general rule is that a witness to the will is not allowed to benefit from the will (Wills Act)
This is not an issue for HST.
It can be argued that a FST is ‘dehors’ (outside) the will, so this would not affect the validity of the trust (Re Young)

Question 26

What if the secret trustee disclaims the legacy?

Answer 26

Will not defeat a HST (Blackwell v Blackwell)
- equity will not allow a trust to fail fro want of a trustee
It will probably not defeat a FST (Re Maddock)
- the trust is not constituted until the property vests with the trustee.

Question 27

What if the beneficiary predeceases the testator?

Answer 27

The beneficiary under the will cannot predecease the testator (S. 25 Will Act)
- the gift would normally fail and return to the testators estate or a residuary beneficiary under a resulting trust
FST: beneficiary obtains an interest in the property at the moment the will is executed, so the property goes to the beneficiary’s estate (Re Gardner)

Question 28

What if it is a secret trust of land? What formalities are necessary

Answer 28

A disposition of land under a secret trust must be compliant with s. 52 LPA 1925 (Re Baillie)
Ottaway v Norman
- an oral disposition of a bungalow not evidences by signed writing was allowed.