Secret Trust


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Secret Trust

  1. 1. Full SecretTrustHalf SecretTrust1SECRET TRUST
  2. 2. LEARNING OUTCOMES2Students will be able to:1) To define and illustrate the concept of Secret Trust.2) To identify and distinguish the various types of Secret Trust.
  3. 3. What is Secret Trust ?3The trust fund for the one’s you love.The creator doesn’t want anyone to knowabout it.He will instruct the trustee to distribute thefund after his death.
  4. 4. HOW?4 The formality requirements under the English Wills Act1837, section 9 was not complied with.S. 9 stated that will have to be made in writing, and properlysigned and witnessed.Its purpose is to prevent fraud.
  5. 5. 5General rule : failure to comply, if provisions of s. 9 arenot complied with, the will is completely void and anytrusts which it purports to create will be invalid.However a secret or half secret trust may take effect onthe death of the testator without any need- to specify the terms of the trust- to reveal its existenceFormalities can sometimes encourage fraudEQUITY WILL NOT PERMIT A STATUTE T0 BEUSED AS A CLOAK FOR FRAUDThe doctrine of secret and half secret trust have evolvedto prevent this.
  6. 6. Reasons6 Two reasons why a testator may wish to avoid formality;1) He may wish the identity of the beneficiary to remainsecret.2) He may simply not have made up his mind at the time ofmaking the will relating details of all the dispositions
  7. 7. Methods of Avoiding Formalities71) A can leave property by will to B, (complies with theprovision of the Act) but having come to an (unwritten)understanding that B is merely trustee of it in favour ofC - Fully Secret Trust2) A can leave property by a valid will ‘to B on trust’, butwhere the beneficial interest under the trust (forexample, in favour of C) is undeclared.- Half SecretTrust
  8. 8. Fully Secret Trust8A testator bequeths property to a specified person in his willwho has agreed that he will hold the property left to him ontrust for a third party.Fact of the trust and identity of the beneficiary are notrevealed.
  9. 9. Dr. Zuraidah Ali9A(testator)B(primary donee/trustee)C(secondary donee/Beneficiary)Identity Concealed)A wanted to leave some propertyto C secretly.Leave the property in his will toB, whereby B agreedthat C will receive the property.on the death of A.FULLY SECRET TRUST
  10. 10. Blackwell v Blackwell (1929) AC 31810Dicta of Viscount Sumner;“ The necessary elements. . . are intention,communication and acquiscence. The testator intends hisabsolute gift to be employed as he and not as the doneedesires; he tells the proposed donee of his intention and ,either by express promise or by tacit promise, which issignified by acquiscence, the proposed donee encourageshim to bequeath the money in the faith that his intentionwill be carried out.
  11. 11. Leading Authority : HOL in McCormick vGrogan (1869) LR HL 8211The basis of enforcement is fraud.It would be fraudulent for B to take beneficially, he will berequired to enforce the trust in favour of C
  12. 12. Ottoway v Norman [1972] 2 WLR5012Mr. Ottoway devised some of his property to Miss Hodges for herto 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 againstHodges’s executors claiming entitlement under ST to theproperty which had been left in Ottoway’s will.
  13. 13. 13Brightman J.a) “ It will be convenient to call the person on whom such atrust is imposed the “primary donee’ and beneficiaryunder the trust the ‘secondary donee’.b) set out the elements necessary to prove the existence of afully secret trust:1) The intention to subject the secret trustee to an obligationin favor of beneficiary2) Communication of that intention to the trustee3) Acceptance of that obligation by the trustee either expressor impliedly
  14. 14. 14It was found that Hodges had known ofOttoway’s intention and had agreed.Held: therefore, the property should pass tothe claimant.It is immaterial whether these element existbefore or after the will of the donor(testator).
  15. 15. Requirements : Fully Secret Trust15a)      Intention.b)     Communicationc)      Acceptance.
  16. 16. Intention16i) Need to illustrate sufficient certainty of intention.ii) Need to show that the testator intended to subject thesecret trustee (primary donee) to a mandatory obligationto hold property for the benefit of secret beneficiary(secondary donee).iii) Case : Re Snowden [1979] 2 All ER 172
  17. 17. Communication171) Communication of both fact of the trust and the terms ofthe trust.2) Communication of the extent of trust.3) Communication must be made before the death of thetestator.4) Communication to joint trustee.
  18. 18. Acceptance18 Intended trustee accepted that he would hold it on trust.
  19. 19. Half Secret Trust.191) The existence of the trust is disclosed by the will but notthe term2) The testator indicates in his will that the recipient of thebequest is not intended to take the property absolutely but asa trustee.3) The identity of the ultimate beneficiary remain concealed.4) The beneficiary in the will be seen as a secret trustee.
  20. 20. 20The substance of a half secret trust:A will leaves a legacy to B “to be held upon trust as I havedeclared to him.”Hence: existence of trust is known but NOT the term.Situation :Secret trustee will ignore a property and take theproperty left in a will.
  21. 21. 21A(testator)B(secret Trustee)C(Beneficiary- concealed)A will leave propertyto B as secret trustee and C’s identity will be concealed.HALF SECRET TRUST
  22. 22. Requirements : Half Secret Trust221) Intention.2) Communication.a) Communication must be made before the execution ofthe will.b) Evidence will not be admissible of communicationinconsistent with the face of the will.3) Acceptance.
  23. 23. 23 Important consideration is the time of the communicationof the objects to the trustee1) Communication to trustee before of at the time ofexecution- Trustee accepts the trusteeship - he is bound to effect thetrust
  24. 24. 242) Communication to the trustee after the execution of thewill- English decisions deny that there had been a validcommunication and acceptance of half secret trust.- If communication took place after the will, X the trustee willhold the property for the testator’s estate : objects have notbeen effectively specified- Cannot allow testator to create a valid trust through a validwill but bypass the Wills Act
  25. 25. Re Keen [1937] Ch 23625Testator left £10,000 to two trustees “to be held upontrust and disposed of them among such person, personsor charities as may be notified by me to them during mylifetime…”Prior to this one of the trustee had been given a sealedenvelope with the name of intended beneficiary.Ct : Not a valid trust as the letter was inadmissible andunattested.Inconsistent with will.