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Topic: Secret Trusts
The testator has left property by will to A, but A has in fact promised to give the
property to B
...

Secret Trusts first recognised in McCormick v Grogan 1869
...
g The will says 'To Richard
and David absolutely'

Half Secret Trust
Communication must be before OR at the
time the will is made
There is an indication that the persons
named in the will cannot keep the property
for themselves eg 'To Richard and David
for a purpose that I have made known to
them'

The oldest type
If fail may not result to residuary estate

Result to residuary estate if fail

Key Controversy: Whether secret trusts' recognition is compatible with the Wills Act
1837--> the only way to make a gift is through the will( Wills are public documents)
...
Such trusts are therefore
treated as testamentary trusts, which are recognised despite the failure to comply with the
formalities of the Wills Act
I
...

III
...


If the secret trust is valid, property that is transferred to the legatee will be held
on trust for another in circumstances in which either there is no indication of a
trust on the face of the will ( Fully ST) or
the will identifies the trust, but not the terms and the objects (Half ST)
In both cases, property is to be disposed after the testator's death according to
terms that are not declared in the will, contrary to the strict formality
requirements of that Act
Both FST and HST operate OUTSIDE of the will and are therefore not caught by
the formality requirements under the Wills Act

 Secret Trusts are properly analysed as Express Trusts that are validly declared during
the testator's lifetime, following communication by the testator and acceptance during
the trustee
...
Although these trusts are not constituted until the subject
matter of the trust is vested in the trustee by the executor following the testator's death,
it does not follow that they are testamentary trusts, because they have already been
created inter vivos; it is only the constitution that occurs on death and automatically
once property had been transferred by the executors to the trustee
...
That, however, does not mean that fraud is an
essential ingredient for the application of the doctrine: the reason for the rule is not part of
the rule itself
...
" Megarry V-C in Re
Snowden (1979)
The fact that the trust is declared whilst the testator is still alive, but is constituted only
following the testator's death, means that Equity allows the trust to bind property in the
testator's estate that may have been acquired after the trust had been declared
...
Dehorns the will
1
...
For example, in Re Young, a testator made a bequest to his wife and
imposed a condition that she should make certain bequests that he had previously
communicated to her, including a gift of £2000 to his chauffeur
...
It was
held, however that the chauffeur was still entitled to the gift, because it arose
from an oral trust declared by the testator and was not a bequest under the
will, so that the testamentary formalities were irrelevant
...
Since secret trusts are not constituted until after the testator's death, the terms of the
trust can be changed by the testator, for example by the will being revoked or altered,
or by the property disposed of in some other way
...
This will apply where the testator has made a clear
representation about the validity of the trust, followed by a detrimental reliance on the
part of the beneficiary
...
If the trustee were to die before the testator, then this would presumably invalidate
the trust
...
As regards to
HST , it might be argued that the death of the trustee should not invalidate the trust
because of the maxim that a trust will not be allowed to fail for want of a trustee,
unless the identity of the trustee is especially significant
...
Of
course, where the trustee had died before the testator, the testator will usually have
the opportunity to appoint another trustee
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The trustee will be free to revoke his acceptance of the trust before the testator's
death, so that the trustee will no longer be bound by his or her undertaking to hold
the property on trust
...
If a trustee seeks to
renounce the trust after the testator's death, this will be too late and the trustee will
be bound by the trust until a replacement trustee can be appointed
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What should happen where the beneficiary of the trust dies before the testator? In Re
Gardner (No
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Usually, where a legatee dies
before the testator , the gift lapses, unless the legatee has acquired a prior interest in
the property
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Re Gardner (No2) should consequently be
regarded as wrongly decided
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6
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This was
recognised in Re Baillie , as regards a HST of land
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This might mean that FST of land operate as constructive trusts, since such
trusts of land are valid despite the absence of writing, or that the court failed to
appreciate the significance of the oral declaration of the trust in that case
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The use of this doctrine does not mean that the trust is not an
express trust
...
The will
instead indicates that a gift is made to a particular person absolutely, but the testator intends
the legatee to hold the gift on trust for somebody else
...
g
mistress / illegitimate child

Four requirements for a FST
(a) T/or must make a will leaving a gift to the Ostensible Beneficiary (OB) absolutely
(b) T/or must inform the OB that he wishes him to hold as a trustee
(c) The OB must consent to being a trustee
(d) T/or must communicate the terms of the trust to OB

1
...

The FST may not , however, be intended to arise immediately on the testator's death
...
This type of trust is illustrated in:
 Ottaway v Norman [1972] Ch
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The testator made an agreement with the housekeeper that she
would leave the bungalow in her will to the testator's son
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But, 4 years later, she made a new will that
left the bungalow to the defendant
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The son also argued that his father intended
that the housekeeper could spend the money as she wished, but that anything
that was left was to pass to the son
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The housekeeper would then have been free to spend all the money as
she wished, but anything that was left on her death would have to be left to the
son in her will
...

o Consequently, if she had not left the residue of the money to the son in her will,
it would still be held on trust for the son by the executor of her estate
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o Since no requirement was intended, it followed that there was no ascertainable
fund to which the trust would attach
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He told Grogan that he had made a
will long ago, leaving all his property to him
...
Grogan was told
that he would find the will and a letter
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The letter asked Grogan to make
various gifts to a large number of named persons
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Grogan paid some beneficiaries but no others, and one of
those left out, McCormick brought the case
o Held: Craig had not intended a trust, but had instead made an outright
gift of his property to Grogan
 Margulies v Margulies 2000 WL 362514 (1999-2000) 2 ITELR 641
o Alexander Marguiles had 3 children
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The facts of the case are confusing, because there were,
allegedly, several attempts to do this
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Private instructions to him, to give whatever he
thinks appropriate to Stephen and or grandchildren'
o There must be certainty of intention, in that the testator must clearly
indicate to the secret trustee that they want them to hold the property

that they are leaving them on trust
...

 Chinn v Hanrieder [2009] BCSC 635
o FST of mineral rights was established
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As
long as the intention to declare a trust is clear, then the courts may give
effect to a secret trust
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2
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The secret
trustee promises to carry out the wishes of the testator
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The one who is not informed, he is not bound
 Implied £ in those 2 - joint tenancy
o communicate to one of them before/ at the time of signing the will , both
bound
o If communicate to only 1 , AFTER signing the will, only that person is bound by
the trust
 Moss v cooper [1861] 1 J & H 352
o John Hill wanted to leave property to charity, but he could not do this because of
the Statute of Mortmain
...
Hill gave instructions on his real wishes to one of them,
Gawthorn, who passed this on the other two
o Held: Sir Page Wood VC at 367 There was no 'distinction between a will made
on the faith of a previous promise and a will followed by a promise'
o The communication must however be made before the death of the testator
 Wallgrave v Tebbs [1855] 25 LJ Ch 241
o William Coles made a will in 1850 leaving £12,000 , freehold land in Chelsea,
and a field in Earl's Court to Tebbs and Martin
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Tebbs and Martin did not know of
the existence of this letter until after the death of Coles
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As there is no trust, the will takes
effect and the persons to whom the property is left keep the property
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D
...
Boyes had told Carritt that he was to hold the
property on trust for a certain lady and child and would receive further directions
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After rhe death of Boyes, a doc was found telling Carritt to give everything
to Nell Brown, except £25 for himself
o The secret trust was invalid because the legatee had to know who the

o
o

beneficiary was before the testator died: it would be only once all of the key
terms had been communicated that the trustee could have accepted the trust so
that it performance would be binding on him
...

Even though the ST failed, Carritt could not keep the property for himself,
because he had agreed to be a trustee
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Recognition of FST to prevent fraud
 Thynn v Thynn [1684] 1 Vern 296
o Thynn's original intention was to make his wife executrix of his will, but her so
told her that it would be better if he was the executor
...
He
told his mother that he would hold on trust for her and his mother persuaded
his father to change the will in his favour
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Acceptance by the legatee
The only way to not accept it is to say 'NO'
The trust must be accepted by the legatee expressly or by acquiescence
...

Unlike the requirements for a HST, it does not matter whether these conditions of
communication and acceptance are satisfied before or after the will is made, but they must be
satisfied before the testator's death
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So he could not very well agree to carry out the trust
...
He asked that when she died she leave the house and its
contents to his son William , and William's wife, Dorothy
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Later, Hodges changed
her mind and in a new will left the house to Mr Norman and his wife
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William Ottaway claimed that Norman held the
house on constructive trust for himself and Dorothy
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The
Normans were bound by Hodge's promise
...
e breaking their promise
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So Eva Hodges was not
free to leave her property to whoever she chose
...
e they can leave their property to whoever they like
...

He then told he solicitor that he wanted him to use the proceeds of the policy to
look after his partner and children
...
It was held that the solicitor held this money
on trust for the partner and children, by analogy with a ST
...

o At that point, the solicitor received the proceeds of the policy but he was then
obliged to apply the money for the benefit of the testator's partner and children
...


4
...
Even if the communication is
in writing, the acceptance is likely to be oral
...

The person seeking to establish the ST bears the burden of proving that the trust had been
created
...

An analogy was drown with the equitable doctrine of rectification of documents, under
which a high standard of proof is required to show that the document does not reflect the
actual intention of the parties so that it should be altered through the exercise of the
equitable jurisdiction
...

The balance of probabilities simply means that it is more likely that this happened
than it did not

Megarry V-C accepted that the ordinary civil standard of proof on a balance of
probabilities applied to establish a FST, save where fraud was asserted against
the alleged trustee
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She left her
residuary estate to her brother absolutely
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He left his property to his son
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The question for the court

o

o
o

o

concerned the standard for proving this trust
...
Rather, the will identifies who should receive property and then a
trust external to the will is imposed on the legatee to reflect the testator's intent
...
It followed that there was
no single standard of proof for all secret trusts ; the standard depended on
whether or not fraud was being proved
...
But if fraud where not alleged, the
lower civil standard of proof on the balance of probabilities would apply
...

The testatrix was not considered to have intended to impose any legally
enforceable obligation on her brother, but had simply left property to him to
determine what he thought she would have done had she made up her mind as
to what should happen to her property
...
Consequently, the 1st requirement of
a FST had not been proved to have been satisfied
...

Since, recognition of all FST can be justified by the need to prevent fraud in the sense of
unconscionable conduct in defeating the testator's expectation that property will be held on
trust, it would appear that, when determining the standard of proof, fraud is to be interpreted in
a narrow sense to mean deliberate and conscious wrongdoing amounting to deceit
...
Where, however, the issue is simply whether the conditions for establishing a FST
have been satisfied, such as whether the testator intended such a trust to be declared, as in
Re Snowden, there is no allegation of fraud and the balance of probabilities standard applies
...


Method of Communication
"It is communication of the purpose to the legatee, coupled with acquiescence or
promise on his part that removes the matter from the provision of the Wills Act
and brings it within the law of trusts
...
811
Multiple OBs
Re Stead [1990] 1 Ch
...
9 of the Wills Act 1837 (as
amended by s
...
"

Half Secret Trusts
First recognised :
 Blackwell v Blackwell [1929] AC 318 (HL)
A HST is an express trust that is declared by the testator in his will
...
It will then be unconscionable for the trustee to break this undertaking
once the trust has been constituted by transfer of property to the trustee after the
testator's death
Same as FST
1
...
Communicated to STee
3
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It is clear from the will that
the legatee takes as a trustee rather than beneficially
...
Despite this, the courts have been willing to enforce
such trusts, albeit subject to stringent conditions
Communicated to 2 trustees: Re Stead - Joint tenants - communicated to both
trustees, but not all of them are informed, not consistent with the will
...
Time of Communication
The terms of the trust must be communicated to the trustees before, or
contemporaneously with the execution of the will
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Consistency with terms of will
 Re Keen [1937] Ch
...
Further, it did not matter that the envelope was given
to only one of the two trustees named in the will
...
In that case , the testator had
left £10,000 in his will to his trustees, to be disposed of by them to
such people or charities as he would notify to them during his life
...

 Re Huxtable [1902] 2 Ch 793
o The will stated that £4000 was to be held on trust for charitable
purposes to be agreed between the testator and trustee
...

3
...
This
was recognised:
 Re Colin Cooper [1939] Ch 811
o The testator declared a HST of £5,000 in his will and communicated
the terms of the trust to his trustees before the will was executed
...
The new will stated that the £5,000 bequethed to his
trustees was to be increased to £10,000 and that the trustees knew
the testator's wishes as regards the use of him
...
It was held that the first £5,000 was held o the terms of the
ST as had previously been communicated, but the additional £5,000
was held on resulting trust for those entitled to the testator's residuary
estate, because this additonal amount had not been communicated to
the trustees
...

It was also accepted that if the later bequest had been only slightly
more than the sum communicated, then this would have been caught
by the HST by virtue of the de minimis principle, namely that small
differences in amounts are not significant
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Trustees as beneficiaries
 Re Rees [1950] Ch 204
o The testator declared a HST
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It was held that the surplus could not
belong to the trustees, but rather was held on resulting trust for those
entitled to the testator's residuary estate
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 Re Tyler [1967] 1 WLR 1269, 1278
o Pennycuick J said that he did not find the reasoning in Re Rees to be
easy
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o Where the trustees are intended to benefit from the testator's estate,
but this is not expressed in the will, the high standards of behaviour
expected from the trustees should be such that they should not
receive the property beneficially
...

5
...
The requirements for this doctrine do appear to
be consistent with the requirements for the HST , since the testator must
have communicated the terms of the trust, including the identity of the
beneficiaries, to the intended trustee before, or at the time that, the will was
made and reference to the trust must be made in the will
...
But it has been
recognized that oral communication of the terms of the trust are sufficient for
a HST to be valid
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Although fraud has been significant to the recognition of
FST , it appears not to be relevant for HST since as the trust is apparent on
the face of the will, there is little scope for the trustee to defraud the
beneficiaries, save where the trustee might assert that the communication of
the terms of the trust occured after the will has been executed
...
In
other words, this operates as a form of estoppel , because of the key
requirements of communication, acceptance, and reliance
...


The Theoretical Basis for Secret Trusts
Ottaway v Norman [1972] Ch
...

344
Re Fleetwood (1880) 15 Ch
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594
(b) Attestation by a
Secret Trustee Section
15 Wills Act 1837
(c) Secret Beneficiary Predeceases the Testator
Re Gardner [1923] 2 Ch 523
Re Gardner (No
...
230
(d) Secret Trustee Predeceases the Testator

Re Armitage [1972] Ch
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220 - beneficiary dies before testator - gift is void
Irven v Sullivan ??
Tutorial 7: Secret Trusts
Reading:
Textbooks
Virgo (2012): Chapter 5 (pp
...
146-160
Journal Articles
Critchley (1999) 115 LQR 631
Wilde, ‘Secret and semi-secret trusts: justifying the distinction’ (1995) 59
Conv 366 Meager, ‘Secret Trusts – do they have a future?’ (2003) Conv
203
Challinor, ‘Debunking the Myth of Secret Trusts?’ (2005) Conv 492
Questions
1
...
In 2009, Reginald told Tom
to use his money for the benefit of Reginald’s daughter and aged aunt
equally
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Simon agreed
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Shortly
afterwards his aged aunt died
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His executor found a
letter addressed to Tom, asking him to use the money for the benefit of his
son only
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 Land
Una : life interest in the house ; Trust of a life interest for his wife, thereafter Simon
FST - Communicated during his lifetime yes, accepted yes
Simon bound? s53(1)(b) Trusts of Land : manifested and proved in writing, hasn't
been -INVALID!
Ottoway v Norman - to deny the interest would be unconscionable, constructive trust
on a FSTee ; formality requirement not apply - ST = constructive trust
 £10,000
HST
Re Keen - prior communication rule, prior or time of, or else void! breaks rule here
LETS SAY IT IS VALID :Extra £5,000 comes back to the estate ### FST
Sufficient communication; letter after he died -not enough
FST attempt: no problem with delay in communication , 10,000 to 15,000 ?
Letter:
If aunt dies, before bequest takes place and will hasn't changed = 5,000 kept by the
FSTee

2
...
It contained the following clause: ‘I
hereby leave my Mayfair apartment to my old friend, Sue, trusting that she will
use it as agreed
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Harriet and Keith had an intimate relationship many years ago
and Harriet had continued to ‘hold a candle; for him
...
Six months ago she said to Sue:
‘don’t give the money from the sale of my apartment to Keith that’s all in the past
now
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He’s the love of my life’
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Unfortunately, Harriet died last month
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Advise Sue

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