Secret Trusts

It is not publicly known or available to be known that there is a trust. As a result, exists
outside of the testator’s will. It is not testamentary. There is no any official document

t proof.

Blackwell v Blackwell

Equity fastens on the conscience of the legatee a trust, a trust which otherwise would
be inoperative, in other words, it makes him do what the will in itself has nothing to do
with, it lets him take what the will gives him and then makes him apply as the court of
conscience directs, and it does so in order to give effect to wishes of the testator which
would not otherwise be effectual.

FULLY SECRET TRUSTS

- A leaves a legacy to B and B agrees to hold the same upon certain trust but
there is no hint of the trust on the face of the will. Thus, on the face of it, B takes
beneficially. If formalities are required to be complied, then to allow B to take
beneficially is to allow statute to be used as an instrument of fraud by B.
- The court engrafts the trust on the devise, by admitting evidence which the status
would in terms exclude, in order to prevent a party from applying property to a
purpose foreign to that for which he undertook to hold it.

Brown v Pourau

A lady, owned a property which she inherited from her father. On her death, the
property passed under will to her eldest daughter, E and when E died, the property
passed to her son, P, the defendant. As the plaintiffs, E's siblings challenged the
lady’s will on an argument that she had many times mentioned the intention to leave
the homestead as a Maori communal home to her family, amounting to a secret
trust. The court held that the certainty of object was not definite because it was not
possible to decide who was family and who was not. The court further stated that, to
the fair satisfaction of the court, the three elements of a secret trust have to be
established.
 Elements of a valid Secret Trust

- If any of these 3 elements is not satisfied, then a claim that a secret trust exist
will be unsuccessful.

Blackwell v Blackwell

The necessary elements are intention, communication and acquiescence

(acceptance). The testator intends his absolute gift to be employed as her and not
as the donee desires. He tells the proposed donee of his intention, by express or
tacit promise, the proposed donee encourages him to bequeath the money in the
faith that his intention will be carried out.

a. Intention

Ottaway v Norman

The secret trust applied to the testator’s bungalow, furniture and fittings but not to
money devised to the testator’s housekeeper since there was insufficient evidence of
the testator’s intention that she was not to keep the money. This requirement is no
different from the requirement that conventional express trust must demonstrate
sufficient ‘certainty of intention’ to create a trust. it must be shown that the testator
intended to subject the secret trustee to a mandatory obligation to hold the property for
the benefit of the secret beneficiary. An intention to impose a purely moral obligation is
insufficient.

Re Snowden

An elderly woman was unsure how to deal with her property on death. She left the
property to her elder brother with the words ‘he shall know what to do’. However, her
brother died only days later. The issue was whether the trust would survive or fail. It was
held the brother was not subject to the secret trust. The deceased woman had only
intended to impose a moral obligation on him. It must be shown that the testator
intended to impose a legal obligation on the legatee to act as a secret trustee.
 b. Communication
- Can be affected at any time during the life of the testator, before or after the
execution of the will. It is equally effective if the testator were to hand to the
trustee a sealed envelope containing the terms of the trust, and instructed the
trustee not to open it until after the death of the testator.

Re Boyes

If the testator had communicated his intention to the trustee that the property to be left
to him by will is to be held on trust but not its terms before his death, and after his death,
a letter containing the terms was found, the trust failed.

If the intended trustee is not informed about the trust at all, and only be informed after
the death of the testator, it will become an absolute gift. Uncertainty in terms of trust.

- What if the elements of ST is fulfilled, but the terms of the trust is uncertain?

Brown v Pourau

If an intended trust if established, and the beneficiaries are unascertainable, the secret
trustee cannot take beneficially. This is for the reason that he has accepted the position
of trustee. If a secret trust had been created, he would be then holding the property on
trust for the residuary devisees or legatees, and if there is none, for the persons entitled
on intestacy.

If the trustee informed during the lifetime of the testator that he is to hold the property on
trust but the terms of the trust were not communicated to him, then he holds the same
on resulting trust in favour of the testator’s residuary legatee or devisee, failing which in
favour of the testator’ instestate successors.

Re Keen

The issue was whether valid communication had taken place during testator’s lifetime
by a trustee being in possession of an envelope sealed by the testator which contained
details of the terms? In this case, the testator left 10,000 pounds to two trustees “to be
held upon trust and disposed of them among such persons or charities as may be
notified by me to them during my lifetime…” Prior to this, one of the trustees had been
given a sealed envelope with the name of the intended beneficiary.

The court held that there was no legitimate secret trust. The High Court held that Mr
Keen had failed to inform the trustees during his lifetime of the intended beneficiary, as
he had promised in his will clause. Since the trust failed, the money fell to Mr Keen's
residual estate. The Court of Appeal held that the trustee had the sealed envelope,
meaning that they had the means of information available (to manage the trust), but his
trust nevertheless failed because it was not properly drawn up in compliance with the
provisions of section 9 of the Wills Act 1837.

If testator was to hand to the trustee a sealed envelope containing the terms of trust and
instructed the trustee not to open the same until the death of testator, it is acceptable.

c. Acceptance

Wallgrave v Tebbs

The court held that a claim founded on secret trust failed because the devisees knew
nothing of the testator’s intention until after his death. The parties seeking to avoid the
devise have failed to show that during the testator’s lifetime, there was any bargain or
understanding between the testator and the devisees, or any communication which
could be construed into a trust, that they would apply the property in such a manner as
to carry the testator’s intentions into effect.

Brown v Pourau

Once communication is established, silence of the trustee can amount to acceptance.

The principle that emerged in the Chancery Courts was that if he or she does not agree
to serve as a trustee, a person who receives such a request is obliged to say
something.
HALF SECRET TRUST

- A by will leaves a legacy to B to be held upon trust as I have declared of him.

The existence of a trust is known, but not the terms.

The existence of the trust is disclosed in the will but not the terms of it.

- The identity of the beneficiary remains concealed.

- Requirements:

1. Intention

2. Communication: a) before execution of will b) after execution of will

3. Acceptance: trustee accepts the trusteeship- he is bound to effect the trust

E.g. As a hidden trustee, A will leave the property to B and the identity of C will be
concealed.

a. Communication to the trustee before or at the time of the execution of the will

Blackwell v Blackwell

If the object is communicated to the trustee before or at the time of the execution of the
will, which states that the objects have been so communicated, and the trustees
accepts the trusteeship, then he is bound to effect the trust and ‘it is communication of
the purpose to the legatee, coupled with acquiescence or promise on his part, that
removes the matter from provision of the Wills Act and brings it within the law of trusts.

b. Communication to the trustee after the execution of the will

- If the object is communicated to the trustee after the execution of the will, the
English decisions deny that there has been a valid communication and
acceptance of a half secret trust.
- Main reason : a testator cannot create a trust through a valid will but at the same
time have the luxury of a power to create beneficial interests because to allow
that arrangement would be to allow him to bypass the Wills Act.
Re Keen

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. It was Not a valid trust as the letter was inadmissible and
unattested. Inconsistent with will.

Testator, Keen, gave a sealed envelope to the intended trustee and they knew that the
envelope contained the name of a woman to whom Keen was not married even though
he did not open it until after Keen’s death. After this, Keen executed his will and it only
made references to disposition that may be made after the will’s execution – it did not
make mention of the trusts already created. Thus, even though the trust was
communicated and agreed to before the execution of the will, the fact that it was not
properly incorporated into the will meant it was void. The half secret trust could not be
valid as the trustees were unaware of the intentions of the testator.

Johnson v Ball

It illustrates that you have to look to the will to figure out if the contact was permissible.
Evidence of half-secret trust is inadmissible if it is inconsistent with will

c. Communications and terms of trust ought not contradict the will

- The communication of the trust and the terms of the trust ought not contradict the
will for if the rule is not so, oral evidence would be admissible to contradict the
express words of the will.

In Re Keen Earlier than the date of the will, the act of handing over the sealed envelope
was completed, but the will relates to a trust that will take place sometime in the future.
Mainly because of the confusion between what was supposed to happen and what
actually did, trust failed. “to be held upon trust and to be disposed of by them among
such person, persons or charities as may be notified by me to them ... during my lifetime
...” (1) all the content must be communicated before or at the same time as the will is
made; (2) will must contain no reference to a future communication; (3) actual
communication must not be inconsistent with the express wording of the will.

Death of Secret Trustee

Dies before testator

FST – the trust fails. While the secret trust is created inter vivos, the legal title is
transferred to the trustee under the will. As the secret trustee is already dead at that
point of time, the trust agreements could not put into effect, thus lapses.

In Re Maddock. Llewelyn v Washington It was given that if the secret trustee dies
before the testator, a fully secret trust will fail. This is due to the fact that the legal title
will only be passed to the trustee under the will, despite the secret trust being created
during the lifetime. Since the hidden trustee is no longer at this stage of time, the trust
contract will therefore not take place and it lapses.

HST – the question that the trustee is to take absolutely is not in issue since reference
to the property is contained in the will. Equity will not allow a trust to fail for want of a
trustee. The testator’s personal representative will thus act as a trustee for that purpose.

Mallot v Wilson Equity would not allow a trust to fail for a trustee's sake. Thus, the
personal representative of the testator will serve as a trustee for that reason.

Dies after testator

- The trust survives for both FST and HST.

- The trust has been fully constituted at the point of the testator’s death, that is the
will comes into effect at the time, the trust will not fail for want of a trustee.