Secret Trusts

• A secret trust is a trust where all or some of the terms of the trust are not apparent on the face of the will.

  • Meager: secret trusts are still commonly used today.

• Two types:

  • Fully Secret Trusts (‘FSTs’) – a trust which appears on the face of the will as an outright gift.

    • Can arise in will or on intestacy (Re Gardner (No.2) [1923] – where the owner of property refrains from making a will and so allows the property to pass to the donee as on an intestacy)

  • Half Secret Trusts (‘HSTs’) – a trust which appears on the will as a trust but with beneficiaries unnamed.

    • Can only arise in the will.

• A valid will must comply with s.9 of the Wills Act 1837 (as amended)

  • i.e. it must be in writing, signed by testator and attested by two independent witnesses.

  • Secret trusts violate this as not all in writing, signed and attested.

• The onus is on the person claiming that a trust exists. The standard of proof for establishing the trust is the normal civil standard, namely proof on a balance of probabilities (Re Snowden [1979]).

• Requirements of secret trusts:

  • These conditions will not be satisfied in the will itself but in the circumstances surrounding the will.

  • Peter Gibson LJ in Kasperbauer v Griffith [2000]:

    • 1) There must be a valid intention to create a trust (as well as other of the three certainties)

    • 2) The settlor must communicate the intention to create a trust to the trustee

    • 3) The trustee must accept the trust;

    • The testator then relies on that acceptance by making a will, leaving a will unrevoked or not making a will at all.

  • If a trust is lacking these:

    • FST:

      • If no intention/communication, then the ‘trustee’ takes it as an absolute gift

      • If partial communication/no acceptance then this creates a resulting trust for the estate/residuary beneficiary.

    • HST:

      • Intention should be clear on face of the will (if not then gift)

      • If not validly communicated/accepted then resulting trust.

• 1) Valid Intention:

  • Examples:

    • Kasperbauer – wife ‘knows what to do’ was insufficient for intention.

    • McCormick v Grogan (1869) – property left to legatee on conditions of a letter. Letter said that the legatee was not to be fully bound therefore no certainty of intention.

    • Re Snowden [1979] - Testator wasn’t sure how to divide property. Left property to brother for him to make the decision as to who the property should go to. This was held to lack a certainty of intention.

  • Other certainties must comply with standard tests.

• 2a) Valid Communication of FST

  • Method

    • Express communication is preferred. May be oral or in writing.

    • Can be constructive communication:

      • Re Keen [1937] – terms of trust contained in a sealed envelope opened after death. Trustee must know the envelope contains these instructions. Envelope must be given to trustee (cannot be found among possessions)

        • Lord Wright: a ship sails under sealed orders.

        • Need for ‘double’ acceptance: The trustee must accept that they will become trustees and accept that they will find out who the beneficiaries are after the testators death.

  • Timings

    • At any time before the death of the testator.

    • This is regardless of when the will has actually has been created: Wallgrave v Tebbs (1855)

• 2b) Valid Communication of HST

  • Method

    • Express communication is preferred. May be oral or in writing.

    • Can be constructive communication:

      • Re Keen [1937] – need for double acceptance.

    • Cannot contradict the terms of the will:

      • If the communication only took place to one of the trustees but will says all have been communicated to then will fail

      • If the will says ‘I will communicate to the trustees’ but the trustees were told days before then the contradiction of tenses is sufficient to make the will fail.

      • Re Spence [1949]

  • Timings

    • Must be before or at the same time as the will is made (i.e. cannot be after): Blackwell v Blackwell [1929]

• 2c) Valid Communication (features common to both FST & HST)

  • All terms must be communicated – how the property is to be distributed and who the beneficiaries are: Re Boyes (1884)

  • Including any additions to the trust:

    • Re Colin Cooper [1939] – testator communicated that 5k be left on FST. Increased this sum without telling trustees.

      • In FST the excess is an absolute gift.

      • In HST the excess goes back on resulting trust.

  • If there are more than one trustee, communication should be to all of them

    • If communication takes place to one of them, the rules in Re Stead [1900]

      • Tenancy in Common (i.e. distinct shares in trust property) then only those who accept are bound as only their conscience is affected.

      • Joint Tenancy (i.e. all trustees are one owner):

        • If communicated before the will was made then all trustees are bound.

        • If communicated after the will was made (only FST) then only the accepting trustee is bound.

  • NB Ireland and other jurisdictions where the rules for communication have been standardised.

    • Now the communication of either sort of trust can take place at any point up to the death of the testator (Re Browne [1944])

• 3) Acceptance

  • Acceptance should normally be express but it is permissible for acceptance to be implied from silence

    • Moss v Cooper (1861) per Wood V-C: ‘Acquiescence either by words of consent or by silence’.

    • Affirmed in Ottaway v Norman [1972] Ch 698 - express acquiescence

  • Timing:

    • FST: before death

    • HST: before or at time of creation of will.

  • Acceptance can be revoked provided

    • It is revoked ...

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