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

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'

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

Without mention in the will, secret trusts are constructive trusts

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

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

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

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 

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

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

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

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

Can be made any time before T's death

MOSS V COOPER (1861)

Principle: Expressed by agreement, inferred by silence

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

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

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

RE REES [1949]

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

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