Secret Trusts

Hanbury & Martin---Pg. 249-271

Fully Secret Trust
-Trust is hidden from view, revealed only by extrinsic evidence
-“Blackacre to A”

Half Secret Trust

-evidence of trust is revealed in the will but terms of trust: beneficiaries are not revealed
-“Blackacre to A on trust for the purposes indicated by me to him”

Ottaway v Norman (1972)

Brightman J provided three essential elements to prove existence of secret trusts:
1. Intention to subject obligation
2. Communication of intention
3. Acceptance of obligation

*Confirmed by Blackwell v Blackwell (1929) that the requirements for HST are the same as
FST. Only stricter communication rule for HST.

1. Intention
Evidence must show a clear intention.
Re Snowden (1979)
Precatory words insufficient to create trust.

2. Communication
Fully Secret Trusts
Communication: Before testator’s death
Wallgrave v Tebbs (1855)
Facts: The Legatee was not aware of the testator’s wishes until after testator’s death – the
papers were not found until then.

Held: The Legatee did not therefore hold in trust for the secret beneficiary.

The Legatee must be informed of the terms before the property is vested i.e. before the
testator’s death.

Re Boyes (1884)
-Applied the principle of Wallgrave v Tebbs
 Facts: Trustee (testator’s solicitor) was told of the trust but not the terms in testator’s
lifetime.

Held: No valid secret trust was created. Trustee held the property on resulting trust for the
testator’s next of kin. (conscience affected as he knew about the existence of trust, if not he
can take it as an absolute gift)

Constructive Communication
-Valid communication can be oral or in writing
Re Keen (1937) ---Sealed envelope
Lord Wright: “a ship which sails under sealed orders, is sailing under orders though the
exact terms are not ascertained by the captain till later”

*Testator may give sealed envelope to be opened upon his death.

Half Secret Trusts

Communication: Before or at the time the will is made. If communication takes place after
the will is executed, the secret trust must fail. Property will be held on resulting trust for the
testator’s estate.
Blackwell v Blackwell (1929) House of Lords
Facts: ‘For purposes indicated by me to them.’ Trust accepted prior to the codicil.

Held: Trust was valid.

Acquiescence on L’s part.

Lord Sumner (dicta):

stricter communication rule imposed on HST, whereby communication and acceptance
must take place on or before A’s making of the will.

Re Keen (1937)
Facts: Will referred to purposes to be communicated.

‘I give to the said Charles Arthur, Cheshyre Hazelhurst and Edward Evershed the sum of
£10,000…to be held upon trust and disposed of by them among such persons or charities as
may be notified by me to them or either of them during my lifetime.’

Prior to making the will, testator had handed one of trustees a sealed envelope.

Held: Sealed envelope is acceptable. Lord Wright: “a ship which sails under sealed
orders, is sailing under orders though the exact terms are not ascertained by the captain till
later” (Applicable to FSTs too)

But the trust still failed on alternative grounds:

1. Inconsistency between what the will said and what happened (narrow ratio)
 2. The will purported to grant power to declare a trust in the future (broad ratio)

*Followed in Re Bateman’s WT (1970)

Does the testator have to communicate his intention to all of his trustees, or will just some of
them suffice?
Re Stead
Farwell J:
(a) If the testator makes a fully secret trust by giving property to two trustees to hold as
tenants in common but only one promised to hold the property on trust, the other trustee is
not bound by the trust and can take their share of the property absolutely; and

(b) If the testator makes a fully secret trust by giving the property to two trustees to hold as
joint tenants, whether both trustees are bound by the trust depends on whether the fully
secret trust was made in response to a prior promise by the trustees to administer the trust:

If yes, both trustees will be bound to administer the trust; but

If no, only the trustee making the promise is bound to administer the trust. The other
trustee may take his share of the property beneficially for himself.

Only the person to whom secret trust was communicated will be bound by it.

3. Acceptance
Moss v Cooper (1861)
-Secret trustee can accept trusteeship by acquiescence as well as express acceptance.
 Past Year Secret Trust Question

(b) Ned, a wealthy businessman has substantial savings which he wants to leave to his
nephew Jon. Ned does not wish to make specific reference to Jon in his will because he fears
that this might upset his wife Catelyn. Ned tells his friend Robert that he has made Robert a
beneficiary under his will but that he will let Robert know what to do with his bequest later.
Robert is a little puzzled by this but agrees to help if he can. Ned executed his will three days
before he had spoken to Robert. In it, he left £50,000 to Robert to be used for ‘the purposes as
may be notified by me to you during my lifetime’. Ned has now died. After his death, a
sealed envelope has been found in Ned’s safe directing Robert to pay the money to Jon.

Robert wants to carry out Ned's wishes but the estate is claimed by Catelyn, Ned's wife.
Advise Jon.

Half or Fully Secret Trusts

‘to be for the purposes as may be notified by me to you during my lifetime’ indicates half
secret trust, by looking at the will there is some indication that there is trust, more like half
secret trust than full secret trust
If fully secret trusts, then the will should write in this way: £50,000 to Robert

Requirements of secret trust

Ottaway v Norman (1972), Brightman J

The elements of secret trusts are:

(i) The intention to subject the secret trustee to an obligation in favour of beneficiary

(ii) Communication of that intention to the trustee

(iii) The acceptance of that obligation by trustee either expressly or by acquiescence

Intention

Proof of intention:

1. The will
2. Ned said he will tell Robert what to do
3. Sealed envelope found later might be evidence also
Communication

Ned said he will let Robert know what to do, this probably means Robert knows that he has
to do something.

*Robert might know the existence of trust

BUT timing is an issue:

Half secret trusts, communicate before or during the execution of the will

Ned executed his will three days before he had spoken to Robert. Not valid because after the
execution of will.

Future communication, sealed envelope

Re Keen: sealed envelope is accepted as constructive communication. Future communication,

it creates a post-mortem disposition and is therefore invalid.

But envelope only found after Ned’s death, it was never given to the trustee.

Acceptance

Robert is a little puzzled by this but agrees to help if he can.

Although Robert agreed to help if he can, but he did not know about what he should do, and
he might not know he is going to be trustee.

Might not be able to accept the obligation as trustee.

But Ned said he will let Robert know what to do, this probably means Robert knows that he
has to do something. So might be able to count as valid acceptance.
 Secret Trust Question-Consultation
Jack told his friend Nina that he was going to leave some money to her when he died. He
gave
a sealed envelope to her and asked her to open it when he died and follow the instructions
inside. Nina agreed.
Later that week, Jack met with his solicitor and made his will, which stated: ‘I leave
£300,000
to Nina to be used according to my wishes.’
Jack died recently, his will was probated, and Nina received £300,000 from his estate. Nina
opened the sealed envelope that Jack had given to her. The letter said: ‘Please give half the
money you get from my estate to Sally and keep the rest for yourself.’
Advise Nina.

Answer
1)  Full secret trust or half secret trust?
-         Is there any evidence of trust on the face of the will?
-         Yes: Half secret trust
-         No: Full secret trust
 
2)  Requirements of secret trust
-         Intention of the testator
-         Communication
-         Acceptance
 
3)  Intention of testator
-         Intention to subject a person an obligation in favour of the beneficiary
 
4)  Communication to the secret trustee
-         Communication of the intention to subject another an obligation
-         Timing of the communication
-         Express communication or sealed envelope
 
5)  Acceptance of secret trustee
-         Accept the obligation to be a secret trustee
-         Expressly or by acquiescence

Full secret trust or half secret trust?

Blackwell
‘to be used according to my wishes’ indicates half secret trust, by looking at the will there is
some indication that there is trust, more like half secret trust than full secret trust
If it is full secret trust, then it should be ‘cash to be given to Nina’
Requirements of secret trust
Ottaway v Norman (1972), Brightman J
The elements of secret trusts are:
(iv) The intention to subject the secret trustee to an obligation in favour of beneficiary
(v) Communication of that intention to the trustee
(vi) The acceptance of that obligation by trustee either expressly or by acquiescence
Intention
Intention of testator to subject trustee an obligation for the benefit of beneficiaries
Proof:
-the will
-the letter
-he ask her to follow instructions
Re Snowden: Precatory words insufficient to create trust
*according to my wishes-precatory?
‘to be used’ is mandatory so can establish that there is an intention
Communication
Half secret trust-before or during the making of the will
Existence of trust-whether Nina would have understood she is under an obligation as secret
trustee?
 Jack leave Nina some money
 Sealed envelope
 ‘follow his instructions’ means Nina needs to do something
*Nina most likely knows the existence of trust
Re Keen, sealed envelope can be accepted as constructive communication
Even if she dk the details of trust, as long as she know she has an obligation, the
communication is considered valid.
Half secret trust, if trust fail, she knew existence of trust, resulting trust, because her
conscience is affected. If she didn’t know existence, resulting trust also.
Full secret trust, she didn’t know existence and terms of trust, then she can get it
Full secret trust: Wallgrave v Tebbs, Re Boyes
Acceptance
Moss v Cooper
Express or impliedly/acquiescence
*Nina agreed-express
Conclusion
Most likely a valid half-secret trust