Secret and Half Secret Trusts Essay Example

to dispose of the house via her Will to the plaintiffs. Although Eva agreed with this arrangement she subsequently left the house to the defendants. Bingham J explained that the essential elements of a secret trust are: “…(i) the intention of the testator to subject to a primary donee to an obligation in favour of the secondary donee; (ii) communication of that intention to the primary donee; and (iii) the acceptance of that obligation by the primary donee either expressly or by acquiescence…”

As David Donald QC explains, the arrangements between the testator and the primary donee can be founded upon the essential elements of contract law. However, the doctrinal basis of the fully secret trust inevitably: “…turns rather on the acceptance of a trust by the recipient and avoidance of a fraud on the beneficiary and testator:” The avoidance of fraud has been the underlying rationale for the imposition of the secret trusts and the courts have over the years adhered to this way of thinking.

The primary donee will be held to his promise and there are reasons for this. The testator’s intentions with respect to his property are not taken lightly by the courts and this concept is balanced by the general proposition that no person or entity can be forced to assume the role of trustee. Once the potential trustee agrees to assume this role equity will not permit him or her to renege upon this undertaking.

As explained in Snell’s Equity: If a testator makes a gift of property to T without saying that he is to hold it on trust, and either before or after making his will tells T that he

wishes him to hold the property on trust for P, T will be compelled to carry out the trust if T either expressly promises that he will do so or by silence implies it. ” The elements of ac¬quiescence, intention and communication are therefore essential to the secret trust with the primary goal of preventing fraud and for the effective disposition of property in a manner consistent with the settlor’s propriety rights.

These elements have been succinctly stated by Lord Summer in Blackwell v Blackwell (1929) AC 318 who reiterated that: “The testator intends his absolute gift to be employed as he and not as the donee desires. He tells the proposed do¬nee of his intention and, either by express promise or by the tacit promise which is signified by acquiescence, the proposed donee encourages him to bequeath the money in the faith that his intentions will be carried out. For the prevention of fraud eq¬uity fastens on the conscience of the legatee a trust, a trust that is, which otherwise would be inoperative.

In other words it makes him do what the will has nothing to do with, it lets him take what the will gives him and then makes him apply it as a court of conscience directs. It does so to give effect to the wishes of the testator, which would not other¬wise be effective. ” In a typical case the courts take the position that in all claims touching and concerning the property of a testator who has passed on must be examined with care and caution. To this end the evidence adduces by both sides is required to be unambiguous and satisfactory.

Evidence

of the existence of a secret trust is therefore crucial. The obvious difficulty arises in the very same area that the imposition of a secret trust hopes to avoid. As previously stated the primary goal of the secret trust is to avoid fraud on the beneficiary or the testator. In the event the primary donee reneges on the agreement and maintains that he or she never agreed to accept the terms of the trust contradicting such a claim becomes a mammoth tasks given that many of these secret trusts arrangements are not reduced to writing. Half-Secret Trusts

The ruling in Re Snowden (dec’d) (1979) 2 All ER 172 determined that while a court is inclined to uphold a trustee’s duties under the half-secret trust the onus is on the beneficiaries to demonstrate that on a balance of probabilities the primary donee under the testamentary instrument holds the property upon trust. Unlike the secret trust the beneficiaries are required to prove that the terms and conditions of the secret trust had been communicated to the primary donee/secret trustee by the testator prior to his or her death. The result of this legal framework is obvious.

Should the beneficiaries fail to discharge the burden of proof the half-secret trust will fail. This may seem rather harsh, but when one considers the certainty of intention rules for the imposition of an express trust, this rule is not different from the general rule that a trust will fail in the absence of certainty of intention. Another unique angle of the half-secret trust is that the terms of the trust must be communicated to the legatee prior to the execution of the

will itself. There is a very good reason for this proposition of law.

Unlike a secret trust, the existence of the half-secret trust is typically referred to in the will or other testamentary instrument. By allowing the testator to refer to a half-secret trust that has not yet been created is contrary to the specific purpose of the Will which is designed to facilitate the disposition of attested property. Jurisprudential Basis of the Secret and Half-secret Trusts The House of Lords in McCormick v Grogan [1869] LR 4 HL 82 explained the primary doctrinal basis for the upholding and enforcement of secret and half-secret trusts as a means of preventing fraud.

Patricia Critchley puts the jurisprudential basis for the secret trust in perspective as follows: “…on his death, and that he wishes C to hold it on trust for B, even though no trust for B has been set out in any formal will executed by A. If C agrees, when the property passes to C on A’s death, the court will enforce the secret trust despite its informality and require C to hold the property for B. ” B. Perrins explains the jurisprudential basis of the half-secret trust.

The restrictive parameters within which the half-secret trusts exists are designed to safeguard against the concept that a testator is at liberty to adhere to a power whereby he can make future dispositions of property in the absence of witnesses. Moreover, in the absence of the rules regulating the disposition of property via half-secret trusts the testator would be at liberty to create future dispositions of property by merely referring to a trusts, barely naming a trustee and leaving

the purpose for the creation of the trust to be explained away by future facts and circumstances.

Further as explained in Re Keen [1937] Ch 236 the primary donee cannot be expected to adhere to a some future undisclosed codicil to a Will. Perhaps a clearer explanation for the jurisprudential basis of the secret trust is offered in Parker & Mellows’ Modern Law of Trusts where it is explained that: “secret trusts operate wholly outside the will or intestacy in question and so are governed not by the rules of probate but by the rule of the law of trusts, which in no way prevent the introduction of oral evidence.

This argument will obviously apply both to fully secret trusts and to half secret trusts…The enforceability of such trusts in equity is therefore no more dependent on fraud than is any other type of trust. For these and other reasons, it will be suggested that secret trusts are in fact express trusts. ” As Lord explains in Cairns in Jones v Badley (1868) LR 3 Ch 362 that the transfer of property form one party to another on the basis of some shared understanding is a question of trust itself.

In the absence of some mechanism for safeguarding against the legatee going against the wishes and intention of the testator, beneficiaries and testators would be defrauded without ample protections. The jurisprudential basis of the secret and half-secret trust becomes a necessary measure against abuse of the Statute of Fraud. Cairns explains: “…the Court will not allow the devisee to set up the Statute of Frauds, or, rather, the Statute of Wills. ... But in this the Court does

not violate the spirit of the statutes; but for the .... prevention of fraud, it engrafts the trusts on the devise by admitting evidence which the statute would in terms exclude, in order to prevent a devisee from applying property to a purpose foreign to that for which he undertook to hold it. ” Conclusion R. Meager provides the single most important basis for the perpetuation of the secret and half-secret trusts.

They are essential for conflict management among divided family members. Often times a testator seeks to make arrangements for a mistress or an outside child. If these kinds of dispositions are made secretly they will likely avoid challenges which can not only compromise the value of these gifts by incurring costs, but can ultimately defeat the testator’s intention to benefit another if the gift were to be subject to the formal requirements of dictate by statutory and common law doctrines regulating Wills.