Secret trusts

What are secret trusts?

Testementary trusts - arise in circumstances where T leaves legacy in his will on secret understanding legatee will hold property on trust for third party

MUST comply with requirements of S9 Wills Act 1837

A will becomes public document after probate granted - T may wish to keep secret from public & family

ST's used to avoid knowledge of trust being made public

  • flexibility, allows change
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Origins

CROOKE V BROOKING (1688)

Facts: T bequathed £1500 to 2 brothers S & R to hold secret trust - terms only communicated to S - beneficiaries claimed legacy

Held: provided terms are communicated during lifetime of trustee, equitable obligation becomes attached

'Statute cannot be used as an insturment of fraud'

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Types of secret trust

Fully secret trust

From face of will legatee is entitled to legacy absolutely

No indication of trust in will

Ex: '£500,000 on legacy for Fred'

Half secret trust

Trust not secret but terms remain private

Ex: £500,000 to Fred to be held on trust for such purposes as I have communicated to him"

OTTOWAY V NORMAN [1972]

Principle: it is essential element testator must intend to subject legatee to obligation in favour of B

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Express or constructive?

Without mention in the will, secret trusts are constructive trusts

S53(1)(b) & (c) LPA 1925 - evidenced in writing

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Proving a secret trust

Trustee should keep copies of letters, private records, details of arrangement to beneficiary

OTTOWAY V NORMAN [1972]

Principle: if will contains gift absolute, clear ev is needed before court assumes T did not mean what he said

Civil standard of proof - balance of probabilities

Half secret trusts - T should leave private record of agreement & disclose terms to someone else

RE KEEN [1937]

Facts: T bequathed property - on basis that terms would be botified to trustees - after will

Held: Ev of pre will convo could not be adduced - contradicts what was said in will

HUXTABLE [1902]

Principle: half secret trust - unspecified purposes - indicated in will - T sought to adduce trust was only for T's lifetime - he would be able to dispose under own will

Held: court would not admit ev of this - conflicting with will statement

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The creation of a secret trust

Three vital ingredients needed for fully secret trust:

(1) Intention

(2) Communication

(3) Acceptance

Intention

KASPERBAUER V GRIFFITH [2000]

ST requires certainty of intention that it is a trust to be created

Must be no precatory words

RE SNOWDEN [1979]

Facts: T bequathed estate to brother - 'he will know what to do' - niece & nephew claimed benefit

Held: T only intended a moral obligation on brother - words were insufficient

Half secret trusts - wording of will indicates trust

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The creation of a secret trust (2)

Communication

Terms of trust must be communicated to trustee

Can be oral, form of letter, fax, email, sign language

MOSS V COOPER (1861)

Principle: communication can occur by agent

Can be constructive

Ex: 'not to be opened until after my death' - provided it is handed to trustee during lifetime 

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Communication & fully secret trusts

PROBY V LANDOR

Principle: communication must be made during lifetime of testator

MOSS V COOPER (1861)

Facts: communication made after will - before T's death

Held: valid trust

WALLGRAVE V TEBBS (1855)

Facts: T left money in will - jointly to Mr T & Mr M - after T's death draft letter found specifying how money was to be held - did not communicate during liftetime

Held: No bounding trust - keep money to themselves

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Communication & fully secret trusts (2)

RE BOYES (1884)

Facts: T told intended trustee he was going to be secret trustee of trust - T said terms would be communicated to him in lifetime - did not occur

Held: property held on resulting trust for deceased T - promise of future communiation not sufficient

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Those unaware of the trust...

RE STEAD

If property left to legatees as T.I.C only those communicated to are bound

RUSSELL V JACKSON (1852)

If property left to J.T's & Testator communicated to any of them - all legatees bound by will

  • Must be before execution of will
  • After execution - only those communicated to are bound
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Communication & half secret trusts

Communication must occur before or when will is created

JOHNSON V BALL (1851)

Principle: no ev can be accepted of communication after will is made

Intended trustee cannot take property himself

  • held on resulting trust

RE KEEN [1937]

Principle: if will expressly allows communication to all or any trustees - communication to one trustee will bind other trustees

RE BATEMAN [1970]

Facts: T directed trustees in will - set aside £24,00 to pay income 'to such persons in my sealed letter'

Held: trust invalid - referred to future communication

Communication - oral or written

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Acceptance

Can be made any time before T's death

MOSS V COOPER (1861)

Principle: Expressed by agreement, inferred by silence

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Increasing the legacy

Legatee MUST be informed

RE COLIN COOPER [1939]

Facts: T bequathed £5000 to legatees - later increased to £10,000 - never told trustees

Held: trust effective for first £5000 only

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Can secret beneficiary witness the will?

A witness to a will cannot take legacy of a will

  • S15 Wills Act 1837

RE YOUNG [1951]

Facts: B under HST witnessed will - under s15 signature was valid - would have to forefeit gift due to witnessing will

Held: S15 irrelevant - took legacy from HST which operates outside of will

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Predeceasing the testator

S25 Wills Act 1837

FST - if secret trustee dies before T - property remains in T's estate

HST - Trust will not fail if trustee predeceases - he is not a beneficiary

RE GARDNER (NO 2) [1923]

Principle: if secret beneficiary dies before T, trust will not fail

  • trustee held property for beneficiaries estate
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Can secret trustee take benefit under will?

RE REES [1949]

Principle: not in HST - it would be contrary to express clause in will that he takes proeprty only as trustee

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Theoretical basis of secret trusts

The prevention of fraud

Justification for ST's is to prevent fraud

FST - if T attempts to keep property for himself - this is fraud

HST - If court refuse to admit ev on terms of trust, T could not take property himself, would hold on trust for testator's estate

Dehors the will

Trust must be justified on principle basis

  • Secret trust operates outside will

BLACKWELL V BLACKWELL [1929]

Principle: it is communication of purpose to legatee that removes matter from Wills Act & brings it within law of trusts

FST - express, must be accepted by legatee

HST - need to be in writing

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