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Full Secret TrustHalf Secret Trust
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SECRET TRUST
LEARNING OUTCOMES
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Students 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.
What is Secret Trust ?
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The trust fund for the one’s you love.
The creator doesn’t want anyone to know about it.
He will instruct the trustee to distribute the fund after his death.
HOW?
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The formality requirements under the English Wills Act 1837, section 9 was not complied with.
S. 9 stated that will have to be made in writing, and properly signed and witnessed.
Its purpose is to prevent fraud.
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General rule : failure to comply, if provisions of s. 9 are not complied with, the will is completely void and any trusts which it purports to create will be invalid.
However a secret or half secret trust may take effect on the death of the testator without any need
- to specify the terms of the trust- to reveal its existenceFormalities can sometimes encourage fraudEQUITY WILL NOT PERMIT A STATUTE T0 BE
USED AS A CLOAK FOR FRAUDThe doctrine of secret and half secret trust
have evolved to prevent this.
Reasons
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Two reasons why a testator may wish to avoid formality;
1) He may wish the identity of the beneficiary to remain secret.
2) He may simply not have made up his mind at the time of making the will relating details of all the dispositions
Methods of Avoiding Formalities
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1) A can leave property by will to B, (complies with the provision of the Act) but having come to an (unwritten) understanding that B is merely trustee of it in favour of C - Fully Secret Trust
2) A can leave property by a valid will ‘to B on trust’, but where the beneficial interest under the trust (for example, in favour of C) is undeclared.- Half Secret Trust
Fully Secret Trust
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A testator bequeths property to a specified person in his will who has agreed that he will hold the property left to him on trust for a third party.
Fact of the trust and identity of the beneficiary are not revealed.
Dr. Zuraidah Ali9
A (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 to B, whereby B agreed
that C will receive the property.on the death of A.
FULLY SECRET TRUST
Blackwell v Blackwell (1929) AC 318
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Dicta of Viscount Sumner;“ The necessary elements. . . are
intention, communication and acquiscence. The testator intends his absolute gift to be employed as he and not as the donee desires; he tells the proposed donee of his intention and , either by express promise or by tacit promise, which is signified by acquiscence, the proposed donee encourages him to bequeath the money in the faith that his intention will be carried out.
Leading Authority : HOL in McCormick v Grogan (1869) LR HL 82
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The basis of enforcement is fraud.It would be fraudulent for B to take
beneficially, he will be required to enforce the trust in favour of C
Ottoway v Norman [1972] 2 WLR 50
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Mr. Ottoway devised some of his property to Miss Hodges for her to 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 against Hodges’s executors claiming entitlement under ST to the property which had been left in Ottoway’s will.
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Brightman J. a) “ It will be convenient to call the person on
whom such a trust is imposed the “primary donee’ and beneficiary under the trust the ‘secondary donee’.
b) set out the elements necessary to prove the existence of a fully secret trust:
1) The intention to subject the secret trustee to an obligation in favor of beneficiary
2) Communication of that intention to the trustee3) Acceptance of that obligation by the trustee
either express or impliedly
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It was found that Hodges had known of Ottoway’s intention and had agreed.
Held: therefore, the property should pass to the claimant.
It is immaterial whether these element exist before or after the will of the donor (testator).
Requirements : Fully Secret Trust
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a) Intention.b) Communicationc) Acceptance.
Intention
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i) Need to illustrate sufficient certainty of intention.
ii) Need to show that the testator intended to subject the secret trustee (primary donee) to a mandatory obligation to hold property for the benefit of secret beneficiary (secondary donee).
iii) Case : Re Snowden [1979] 2 All ER 172
Communication
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1) Communication of both fact of the trust and the terms of the trust.
2) Communication of the extent of trust.3) Communication must be made before
the death of the testator.4) Communication to joint trustee.
Acceptance
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Intended trustee accepted that he would hold it on trust.
Half Secret Trust.
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1) The existence of the trust is disclosed by the will but not the term
2) The testator indicates in his will that the recipient of the bequest is not intended to take the property absolutely but as a trustee.
3) The identity of the ultimate beneficiary remain concealed.
4) The beneficiary in the will be seen as a secret trustee.
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The substance of a half secret trust:A will leaves a legacy to B “to be held upon
trust as I have declared to him.”Hence: existence of trust is known but NOT
the term.Situation :Secret trustee will ignore a
property and take the property left in a will.
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A(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
Requirements : Half Secret Trust
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1) Intention.2) Communication.a) Communication must be made before
the execution of the will.b) Evidence will not be admissible of
communication inconsistent with the face of the will.
3) Acceptance.
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Important consideration is the time of the communication of the objects to the trustee
1) Communication to trustee before of at the time of execution
- Trustee accepts the trusteeship - he is bound to effect the trust
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2) Communication to the trustee after the execution of the will
- English decisions deny that there had been a valid communication and acceptance of half secret trust.
- If communication took place after the will, X the trustee will hold the property for the testator’s estate : objects have not been effectively specified
- Cannot allow testator to create a valid trust through a valid will but bypass the Wills Act
Re Keen [1937] Ch 236
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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.
Ct : Not a valid trust as the letter was inadmissible and unattested.
Inconsistent with will.