SECRET TRUST

Full Secret TrustHalf Secret Trust

What is Secret Trust ?

The creator doesn’t want anyone to know about it. He will instruct the trustee to distribute the fund after his death.

The formality requirements under the English Wills Act 1837, section 9 was not complied with.

S. 9 stated that will have to be made in writing, and properly signed and witnessed.

General rule: failure to comply, if provisions of s. 9 is completely void and any trusts which it purports to create will be invalid.

However a secret or half secret trust may take effect on the death of the testator without any need to specify the terms of the trust and to reveal its existence.

Formalities can sometimes encourage fraudEQUITY WILL NOT PERMIT A STATUTE T0 BE USED AS A CLOAK FOR FRAUD

The doctrine of secret and half secret trust have evolved to prevent this.

Two reasons why a testator may wish to avoid formality;

1) He may wish the identity of the beneficiary to remain secret.

2) He may simply not have made up his mind at the time of making the will relating details of all the dispositions

Methods of Avoiding Formalities

1) A can leave property by will to B, (complies with the provision of the Act) but having come to an (unwritten) understanding that B is merely trustee of it in favour of C - Fully Secret Trust

2) A can leave property by a valid will ‘to B on trust’, but where the beneficial interest under the trust (for example, in favour of C) is undeclared.- Half Secret Trust

Fully Secret Trust

A testator bequeths property to a specified person in his will who has agreed that he will hold the property left to him on trust for a third party.

[Eg: A wanted to leave some propertyto C secretly. Leave the property in his will to B, whereby B agreed that C will receive the property on the death of A.]Fact of the trust and identity of the beneficiary are not revealed.

Blackwell v Blackwell (1929) AC 318

H: The necessary elements. . . are intention, communication and acquiscence.”

Leading Authority: HOL in McCormick v Grogan (1869) LR HL 82

The basis of enforcement is fraud. It would be fraudulent for B to take beneficially, he will be required to enforce the trust in favour of C.

Ottoway v Norman [1972] 2 WLR 50

Mr. Ottoway devised some of his property to Miss Hodges for her to use during her lifetime provided always that she was, in turn, to bequeath this property to the claimant after her death. She failed to do so in her will. Rather, she left the property by her own will to Mr. and Mrs. Norman.

After Hodges’s death, the claimant brought action against Hodges’s executors claiming entitlement under ST to the property which had been left in Ottoway’s will.

It was found that Miss Hodges had known of Ottoway’s intention and had agreed.

Held: therefore, the property should pass to the claimant.

It is immaterial whether these element exist before or after the will of the donor (testator).

Requirements : Fully Secret Trust

a) Intention. b) Communication c) Acceptance.

Intentioni) Need to illustrate sufficient certainty of intention.

ii) Need to show that the testator intended to subject the secret trustee (primary donee) to a mandatory obligation to hold property for the benefit of secret beneficiary (secondary donee).

Communication

1) Communication of both fact and the terms of the trust. 2) Communication of the extent of trust. 3) Communication must be made before the death of the testator. 4) Communication to joint trustee.

Acceptance

Intended trustee accepted that he would hold it on trust.

HALF SECRET TRUST.

[A will leave property to B as secret trustee and C’s identity will be concealed.]

1) The existence of the trust is disclosed by the will but not the term

2) The testator indicates in his will that the recipient of the bequest is not intended to take the property absolutely but as a trustee.

3) The identity of the ultimate beneficiary remain concealed.

4) The beneficiary in the will be seen as a secret trustee.

The substance of a half secret trust:

A will leaves a legacy to B “to be held upon trust as I have declared to him.”

Hence: existence of trust is known but NOT the term.

Requirements : Half Secret Trust

1) Intention. 2) Communication.

1. Communication must be made before the execution of the will.

2. Evidence will not be admissible of communication inconsistent with the face of the will.

3) Acceptance.Trustee accepts the trusteeship - he is bound to effect the trust

Important consideration is the time of the communication of the objects to the trustee

1) English decisions deny that there had been a valid communication and acceptance of half secret trust If communication took place after the will. Ie: objects have not been effectively specified

Cannot allow testator to create a valid trust through a valid will but bypass the Wills Act

Re Keen [1937] Ch 236

Testator left £10,000 to two trustees “to be held upon trust and disposed of them among such person, persons or charities as may be notified by me to them during my lifetime…”

Prior to this, one of the trustee had been given a sealed envelope with the name of intended beneficiary.

Held : Not a valid trust as the letter was inadmissible and unattested.

Inconsistent with will.