Please enable JavaScript.
Coggle requires JavaScript to display documents.
Trusts & Equity - Secret Trusts (What is a secret trust? (Two types…
Trusts & Equity - Secret Trusts
What is a secret trust?
Takes effect on death
Not mentioned in the will
Not fully disclosed in the will
Two types
Fully secret trust (FST)
Outright gift in the will to intended trustee
Half Secret Trust (HST)
Trustee named as such, but terms and beneficiaries not specified
In both cases the trustee is separately informed of the terms
Exception to lifetime trust formalities (s53(1), LPA 1925) and testamentary formalities (s9, Wills Act 1837
Motivation for use
Wills are public documents - may want to leave property to people that you don't want to mention, or political organisations you don't want to be openly associated with
Allow escape from formalities - can leave to solicitor and update them informally outside of will
Can act as a vehicle for fraud
Onus is on person claiming trust exists - usual civil standard of proof (Re Snowden (1979))
Justifications for enforcing
'Fraud theory' - McCormick v Grogan (1869)
Prevention of the use of statute (Wills Act) as an aid to fraud
Narrower interpretation requires there to have been an inducement on part of trustee
Broader interpretation only requires that trustee does not carry out testator's wishes
#
In McCormick v Grogan there was held to be no obligation, but judges (Westbury and Hatherley) said that if there had been, the trust would have been upheld
More difficult to use to justify enforcement HST because trusteeship is clear on the face of the will , meaning the trustee cannot keep the property
'Dehors the will theory" - s9 Wills Act 1837 - Blackwell v Blackwell (192*)
Outside the Wills Act theory - secret trusts held to be constituted outside of the will - lifetime trusts
Difficulty here is that they are constituted at death - hybrid of lifetime and testamentary
Requirements for creation
Intention
Communication
Communication of existence (Wallgrave v Tebbs (1855))
Communication of terms (Re Boyes (1884))
Re Boyes - must communicate inter vivos - if trust is communicated but not terms, property is held on resulting trust for the testator's estate
Communication of subject-matter (Re Colin Cooper (1939))
Re Colin Cooper - trust property was increased in a codicil unbeknownst to the trustee - only obliged to hold the amount they knew of
When?
FST - before settlor's death (Wallgrave v Tebbs (1855))
HST - before will is executed
Otherwise would contravene formalities of the Wills Act
Must be consistent with method of communication (Re Keen (1937)) - cannot refer to future communication of terms
Upheld in Re Bateman
How?
Can be oral communication
In writing - can be more beneficial
Re Keen - terms contained in sealed envelope - trustee only needs to know that it contains terms and can accept on that basis
Who?
General rule - all trustees - only trustee who is told is bound
All about conscience being affected by knowledge of trust
Exception - joint tenants - if communicated to one before the will is executed, then all bound - if communication occurred after execution, then only those who were told are bound
Assumption that if one is told, they will tell the other
Also related to inducement - wrong to allow one joint tenant to benefit from the fraud of another
Re Stead (1900)
Perrins - justification is that the only question to be asked is was it induced - if so, all are bound, if not then those not informed are not bound
Acceptance
Must be reasonable to rely on the trustee
Possible evidence
Makes a will (FST and HST)
Doesn't change a will (FST only) - Moss v Cooper
Doesn't make a will (FST only) - Stickland v Aldridge
Express
Implied
Threshold of acceptance is low - silence can be sufficient (Moss v Cooper (1861))
Unless expressly refuse, deemed to accept
Death/disclaimer
General rule - disclaimer defeats trust (Re Maddock (1902) - Court of Appeal)
Reasoning for this is that trustee doesn't receive legal title - in FST just looks like gift - trust not constituted and equity will not perfect an imperfect gift (Milroy)
If can prove existence of trust, then will find another trustee as is standard (Blackwell v Blackwell (1929))
Equity will not let a trust fail for want of a trustee, especially if trustee has already accepted
Kasperbauer v Griffith (2000)
Margulies v Margulies (1999-2000)
Pre-decease of beneficiary
General rule - lapses and goes into estate residue - only constituted on testator's death
Re Gardener (no 2) (1923)
Valid on communication and acceptance - dehors
On testator's death, interest passes to beneficiary's estate
Problem is that this seemed to violate basic probate and trust law - implies cannot be revoked by testator before their death, but wills are revocable - never overturned but should not be followed
Secret trust of land
s53(1)(b) - Law of Property Act 1925 - express trusts must be evidenced in writing and signed by testator
If secret trusts held to be constructive then they are immune from this (s53(2)) - some sense to this because constructive trusts exist to prevent unconscionable behaviour (Gillet v Holt)
Ottaway v Norman seemed to support view but issue of s53(2) never pleaded and not considered in court
Re Baillie - trust didn't comply with formalities and held not to be allowed - but this was at time when HST not upheld so hard to know reason
Secret beneficiary as signatory
s15 Wills Act 1837 - witnesses not allowed to benefit from that will - partly because sometimes have to testify to validity and may be biased - also related to inducement
Re Young (1951) - trust arises in lifetime outside of will - doher
Doesn't matter if the trustee is a signatory because they don't benefit directly
Obligation
Make inter vivos transfer in favour of beneficiary
Make will in favour of beneficiary (Ottaway v Norman (1972))