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MUTUAL WILLS AND SECRET TRUSTS

A Introduction There are 2 key principles underpinning probate law: 1 Testator enjoys the freedom of testamentary disposition, which entails that he is free to revoke his will at his pleasure. - A will has no legal significance until the demise of the testator and, hence, it can be modified or indeed, revoked at any time prior to death: Re Heys [1914] - Provided that it is valid, a later version automatically revokes any predecessor. - Marriage also has an invalidating effect: s.18 Wills Act 1837 1 Testamentary Freedom exception: Mutual Wills - This exception operates to curtail the ability of the testator to change his plans.

2 The terms of a legacy or a testamentary trust must be disclosed on the face of a validly executed trust. - A testamentary disposition, whether by gift or trust, must comply with s.9 of the Wills Act 1837 o Requirements imposed by s.9 are that no will shall be valid unless: It is signed either by the testator or, alternatively, by some other person provided that it is made in the presence of and at the direction of the testator; The signature must be made, or alternatively, acknowledged by the testator in the presence of at least two witnesses present at the same time; and Each witness must sign his name in the presence of the testator, but not necessarily in the presence of the other witness. - The formalities prescribed in s.53 Law of Property Act 1925 will not invalidate a trust created by a will. - The validity of a testamentary trust relies upon whether the will was validly executed. 2 Formalities (s.9 Wills Act 1837) exception: Secret Trusts - Secret trusts drives the proverbial coach and horses through the provisions of the Wills Act 1837.

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Mutual Wills
What are they? Arise where 2 or more parties (usually husband and wife) enter into a binding agreement that they will execute wills in a mutual form on the understanding that those wills are irrevocable and with the intention of benefitting a third party. The agreement between the parties need not be contained in the wills themselves. On the date of the death of the first testator, equity regards mutual wills as being irrevocable. o Prevents the survivor from having a change of heart and leaving the property elsewhere (eg to another wife) In order to manufacture this result, equity imposes a constructive trust that binds the survivor and prevents disposal otherwise than under the terms of the mutual agreement. o Imposition of constructive trust operates by way of exception to s.9 Wills Act and curtails the freedom of testamentary disposition of the survivor. Justified: Equity will intervene in order to prevent the fraud that would arise if the survivor were able to take the benefit of the agreement without performing his obligations Leading case: Dufour v. Pereira (1769) 21 ER 332

1.1 Joint wills (Re Hagger) v. Mutual wills (Olins v. Walters) v. Mirror wills (Re Oldham) Joint: Re Hagger - Single document executed by more than one person, but the joint will is a separate distribution of property by each executor - FACTS: The husband and wife had made wills in similar terms, each leaving their separate property to each other on the first spouse dying with remainders over. They agreed that the wills should not be revoked without the agreement of the other. The wife died first, and the husband received the income for his lifetime from her estate as under the will. HELD: The property of the wife held by the surviving husband

under her will and to be disposed of by his own will was subject to a trust in that behalf under which the legatees in absolute remainder took the vested interests subject to the husband's life interest. Therefore the death of a legatee before the husband's death did not mean that that interest lapsed. His interest had already vested. A common intention of husband and wife and taking of benefit are sufficient to establish mutual wills. - It is perfectly clear that when the husband and wife made this joint will they contemplated that the property which they were pooling would all go to the same beneficiaries ... if I fail to give effect to this ... I shall be departing from the intention of the parties. I am satisfied that the law does not compel me to depart from that intention (Clauson J) Mutual (an agreement between two testators): Olins v. Walters - Two separate, identical wills - This obligation on the surviving testator is equitable. It is in the nature of the trust of the property affected so the constructive trust label is attached to it. The equitable obligation is imposed for the benefit of third parties, who were intended by the parties to benefit from it. It arises by operation of law on the death of the first testator to die so as to bind the conscience of the surviving testator in relation to the property affected. (Mummery L.J) Re Goodchild [1997] 3 All ER 63 - The court will not impose a constructive trust merely because mutual wills are made in almost identical terms. There must be evidence of an agreement to create interests under the mutual wills which are intended to be irrevocable after the death of the first too die. Re Dale [1994] Ch 31 For the doctrine [of mutual wills] to apply there must be a contract at law ... [where] it is necessary to establish an agreement to make and not to revoke mutual wills, some understanding or arrangement being insufficient ... it is necessary to find consideration sufficient to support a contract at law ... the performance of that promise by the execution of the will by the first testator is in my judgment sufficient consideration by itself. (Justice Morritt) Mirror (no agreement): Re Oldham - Two separate, identical wills - Astbury J in Oldham distinguished mutual wills from joint wills - that they are made in identical terms "does not go nearly far enough". There must be "an arrangement proved to the satisfaction of the court" and this must be a binding, irrevocable agreement. - The fact that the two wills were made in identical form does not necessarily connote any agreement that the trust in the will should in all circumstances be irrevocable ... the fact that they thought it safe to trust the other is a very different thing from saying that they bound themselves by a trust that should be operative in all circumstances. (Justice Astbury) 1.2 An absolute interest (Re Goodchild), life interest (Re Hagger) or no interest (Re Dale) can be left to the survivor - Mutual wills are an agreement to leave interest in a certain way: it has nothing to do with leaving dispositions to one another. - It is not essential that each party leave everything to the same person: there do not have to be mutual beneficiaries Absolute interest: Re Goodchild - This is a trust where the beneficiary has an absolute interest to income and capital which cannot be taken away. - FACTS: H and W made simultaneous wills in similar form in favour of their son, S. After W's death, H remarried and died shortly after making a new will in favour of his second wife, D, who now appealed against an award of GBP 185,000 made to S. S cross-appealed against a decision that his parents' wills were not mutual wills. HELD: dismissing the appeal and the cross-appeal, that for the doctrine of mutual wills to apply, there had to be a contract at law and the mutual intentions of the parties had to be irrevocable. Life interest: Re Hagger

- Eg: To make mutual wills leaving the whole of our estates to each other on condition that the survivor leaves their whole estate to our two children, Ernest and Florence, in equal shares - FACTS: Husband and wife made a joint will, whereby they left certain property, which each possessed at the time of the death of the spouse first dying, to the survivor for life with certain absolute remainders over, and they agreed that the will should not be revoked without their mutual consent. The wife died first, and as from her death the husband received the income from the whole estate until his death. HELD: from the death of the wife the property of which the husband was then possessed was subject to a trust under which the legatees in absolute remainder took vested interests subject to the life interest of the husband: and that the death of such a legatee after the death of the wife but before the death of the husband did not occasion a lapse. No interest: Re Dale 1.3 Mutual Wills Contracts - The agreement must make it clear that the wills are mutually binging and irrevocable and it is best to state this in the will itself. - There must be clear and satisfactory evidence of a legally binding agreement, not just an understanding (but an agreement can be inferred by the court) clear evidence of a legally binding agreement Re Oldham [1925] Ch 75 - FACTS: A husband and wife made mutual wills in the same form in pursuance of an agreement so to make them, but there was no evidence of any further agreement in the matter (mirror wills). Each gave his or her property to the other absolutely with the same alternative provisions in case of lapse. The wife having survived and accepted her husband's property under his mutual will subsequently married again, and made a fresh will ignoring the alternative provisions of her own mutual will. HELD: in the circumstances there was no implied trust preventing the wife disposing of her property as she pleased. - General principles prevail and the wife had testamentary freedom to change her will. Cf Re Cleaver [1981] 1 WLR 939 - For two wills to be enforceable as mutual wills, satisfactory evidence going beyond mere simultaneity is required, showing that the makers so agreed between themselves, and that they intended to be bound by that agreement. - FACTS: H and W were married in 1967, aged 78 and 74. H had three children by a previous marriage; W had two nieces. Two months' later they made simultaneous wills in almost identical terms. Seven years later they again made almost identical simultaneous wills. H died, and W received the whole of the net residue of his estate. She then made a further will leaving the whole estate to H's elder child and her husband, and nothing to H's other two children, or W's own nieces. On W's death, H's two younger children sought a declaration that the executors held W's estate on trust to give effect to the second will. HELD: granting the declaration sought, that mere simultaneity of execution was not enough, and there must be satisfactory evidence that H and W had agreed between themselves, and entered to be bound by the agreement, that the wills should be enforceable as mutual wills. In the circumstances of the present case, extrinsic evidence showed that the second will was executed in pursuance of such an agreement. - The fact that they had made their wills together a second time round also became evidence. Re Goodchild [1997] 3 All ER 63 - A mere understanding is not enough. - There must be an actual agreement, not just a mere understanding ... a key feature of the concept of mutual wills is the irrevocability of the mutual intentions. Not only must they be binding when made, but the testators must have undertaken, and so must be bound, not to change their intentions after the death of the first testator. (Lord Justice Leggatt) showing that the wills are intended to be mutually binding / irrevocable Re Goodchild - Key feature is the irrevocability of mutual intentions. - Not only must they be binding when made, but the testators must have undertaken, and so must be bound, not to change their intentions after the death of the first testator. (Lord Justice Leggatt)

Re Hagger [1930] 2 Ch 190 - Specific express reference in the wills themselves: stated in this case that the intention not to revoke the wills would be better stated in the wills themselves and would provide good evidence for intention for it to be mutually binding Re Dale [1994] Ch 31 consideration? - For the doctrine [of mutual wills] to apply there must be a contract at law ... [where] it is necessary to establish an agreement to make and not to revoke mutual wills, some understanding or arrangement being insufficient ... it is necessary to find consideration sufficient to support a contract at law ... the performance of that promise by the execution of the will by the first testator is in my judgment sufficient consideration by itself. (Justice Morritt) - FACTS: A husband and wife entered into mutual wills under which their estates were to be left to their son and daughter equally. The husband died first and his estate devolved according to the agreement. Subsequently, the wife executed a new will under which she left most of her estate to her son. The latter will was disputed. HELD: As the husband and wife had entered into a binding agreement to create mutual wills, the son became the constructive trustee of his mothers estate, holding the property on trust for himself and his sister equally. 2 Why, how and when does equity intervene and what does it protect?

2.1 Why? because wills are ambulatory / revocable (s.18 Wills Act 1837) Re Vyniors case (1609) 8 Co Rep 81b - It expressly said that a will is always revocable and an agreement not to revoke it does not make it so. There may be contractual problems, but as far as the law is concerned, you can always revoke your will. - That is why the doctrine is needed to prevent a fraud on the first testator Dufour v. Pereira (1769) 21 ER 332 - The parties by the mutual will do each of them devise, upon the engagement of the other, that he will likewise devise in manner therein mentioned; and he, that dies first, does by his death carry the agreement on his part into execution. If the other then refuses, he is guilty of fraud, can never unbind himself, and becomes a trustee of course. For no man shall deceive another to his prejudice (Lord Camden). Re Cleaver [1981] 1 WLR 939 [I see] no difficulty in modern equity attaching to such assets a constructive trust which allowed the survivor to enjoy the property subject to a fiduciary duty which, so to speak, crystallised on his death and disabled him only from [making] voluntary dispositions inter vivos. (Justice Nourse) to protect the intended beneficiaries Olins v. Walters [2008] EWCA Civ 782 - If there was a valid contract for mutual wills, the doctrine operates by imposing a constructive trust on the survivor because the deceased had performed her promise to leave her estate to him ... this obligation on the surviving testator is equitable and is imposed for the benefit of third parties, who were intended by the parties to benefit from it. ... It is in the nature of a trust of the property affected so the constructive trust label is attached to it. It arises by operation of law on the death of the first testator to die so as to bind the conscience of the surviving testator in relation to the property affected. ... In my judgment, the trust is immediately binding on the survivor in relation to the deceaseds property left to him on the basis of the contract. It is not postponed to take effect only after the death of the survivor when the property, or what may be left of it, comes into the hands of his personal representatives. (Lord Justice Mummery). 2.2 How? equity imposes a constructive trust in favour of the original beneficiaries

Dufour v. Pereira Olins v. Walters The doctrine operates by imposing a constructive trust on the survivor (Lord Justice Mummery). 2.3 When? on the date the mutual wills contract is made (no: Dufour v. Pereira) - A mutual will is a revocable act. It may be revoked by joint consent clearly. By one only, if he gives notice, I can admit. But to affirm that the survivor (who has deluded his partner into this will upon the faith and persuasion that he would perform his part) may legally recall his contract, either secretly during the joint lives, or after at his pleasure, I cannot allow. - If you can rovoke or edit the wills, provided notice is given or it is done jointly, then the mutual wills contract cannot be binding on the date the contract is made. on the death of the first testator (yes: Olins v. Walters) - The obligation on the surviving testator is equitable. It is in the nature of a trust of the property affected, so the constructive trust label is attached to it. The equitable obligation is imposed for the benefit of third parties, who were intended by the parties to benefit from it. It arises by operation of law on the death of the first testator to die so as to bind the conscience of the surviving testator in relation to the property affected. when the first testators property passes to the survivor (no: Re Dale) - No interest was left to the survivor in Re Dale, it went straight to the beneficiaries. - The doctrine of mutual wills is to the effect that where two individuals have agreed as to the disposal of their property and have executed mutual wills in pursuance of the agreement, on the death of the first ("the first testator") the property of the survivor ("the second testator"), the subject matter of the agreement, is held on an implied trust for the beneficiary named in the wills. on the death of the survivor (no: Re Hagger) - It was deemed that the gift to the predeceased beneficiary estate would be upheld the trust was deemed to have arisen at the death of the first testator. As a result, that gift did not fail. 2.4 What? express terms of mutual wills contract Re Green [1951] Ch 148 the estate of the first testator now in the hands of the survivor Olins v. Walters - FACTS: Husband and wife made mutual codicil (amendment to a will). They left each other the residue of their entire estate absolutely on the condition that the survivor leaves everything to daughter and grandchildren. Following wifes death, husband fell out with one of the grandchildren who sought declaration from court that there was a mutual valid will. HELD: a contrastive trust did indeed rise to protect first testators estate in the hands of the survivor. Re Cleaver [1981] 1 WLR 939 Birmingham v. Renfrew (1937) 57 CLR 666 The purpose of an arrangement for corresponding wills must often be, as in this case, to enable the survivor during his life to deal with the property passing under the will of the party first dying, that is to say, the object of the transaction is to put the survivor in a position to enjoy for his own benefit the full ownership so that, for instance, he may convert it and expend the proceeds if he chooses. But when he dies he is to bequeath what is left on the manner agreed upon. It is only by the special doctrines of equity that such a floating obligation, suspended, so to speak, during the life-time of the can suspend upon the assets at his death and crystallise into a trust. No doubt gifts and settlements, inter vivos, if calculated to defeat the intention of the compact, could not be made by the

survivor and his right of disposition, inter vivos, is, therefore, not unqualified, but, substantially, the purpose of the arrangement will often be to allow full enjoyment for the survivors own benefit and advantage upon condition that at his death the residue shall pass as arranged (Justice Dixon in the Australian High Court). Those who undertake to establish such an agreement assume a heavy burden of proof. It is easy to allege such an agreement after the parties to it have both died, and any court should be very careful in accepting the evidence of interested parties on such a question. (Lord Justice Latham) It is obvious that there is a great need for caution in accepting proofs advanced in support of an agreement affecting and possibly defeating testamentary dispositions of valuable property. (Justice Dixon) the property of the survivor excluding the estate of the first testator: o at the time of the first testators death (Re Hagger) the beneficiary who predeceased the survivor still got their gift o at the time of the survivors death (Re Dale) no interest went to the survivor, it all went to the beneficiaries o from the time of the first testators death up until the time of the survivors death (Re Cleaver) interpreted as a sheet floating over the property surely that is the right idea to apply to the survivors assets as well o none of it is covered (Re Goodchild, Re Green) Goodchild no mutual will but dicta to suggest a constructive trust would only apply to the first testators estate Green trust was not regarded as covering survivors assess However, these two cases are peculiar on their facts This area is still unresolved. Opposing opinions as to what could be the right answer. 2.5 Effects of the constructive trust knowledge of the beneficiaries o if a beneficiary is unaware of the trust, they will be unable to enforce anything o practical difficulty cant enforce anything until they find out and by that time, may be nothing left enforceability and tracing o beneficiaries can pursue the executor and retain property through tracing burden of proof (Birmingham v. Renfrew) o This is the civil standard of proof: 51% balance of probabilities. o Caution in accepting proofs: courts are suspicious of people claiming that a trust is held in their favour. o Thos who undertake to establish such an agreement undertake a heavy burden of proof 3 Are any contractual remedies available? 3.1 Actions between the testators: one living testator suing the other living testator the survivor suing the first testators estate the first testators estate suing the survivors estate Beswick v. Beswick [1968] AC 58 Re Dale 3.2 Actions of the beneficiaries Contracts (Rights of Third Parties) Act 1999 suing the testators or their estates specific performance

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Secret Trusts
What are they and why are they used?

1.1 What are they? fully secret trusts: a settlor leaves a legacy in his will on the secret understanding that the legatee (a trusted person such as a solicitor) will hold that property on trust for a third party. A testamentary provision is left unrevoked or no will is made at all. o It appears from the face of the will that the legatee is entitled to take the legacy absolutely o No indication of a trust or its terms is discernable from the will itself - Ottaway v Norman leading case: Testator left bungalow to housekeeper/ she was under a secret trust to keep property and pass it on to testators son on her death/ she failed to do so and son brought action/ court held son entitled to bungalow on basis that obligation was accepted by her constructive trust half secret trusts: o The existence of a trust is not a secret it is mentioned in the will o The terms of the trust, in particular the identity of the beneficiary, remain private and undisclosed 1.2 Why are they used? secrecy - purpose to keep the identity of the beneficiary undisclosed (eg where the beneficiary is an illegitimate child, mistress, organization that the testator does not wish openly to be associated with) - this degree of secrecy might be viewed as necessary because, once probate is granted, a will becomes a document of public record it can be inspected by anyone who pays the appropriate fee. Indecision - it caters for flexibility and allows changes and future dispositions to be made without adherence to the Wills Acts 1873 - FST caters well for an indecisive testator who cannot make up his mind as to what property to leave to whom - the testators instructions to his trustee may change many times before his death - Watkin: the courts have left open the door for the doctrine to be used, perhaps abused, by the testator who is undecided rather than secretive. - she same degree of flexibility does not apply to HST if the terms of the trust are not communicate either before or contemporaneously with the will, there can be no trust. - Watkin: suggests the same rule should be extended to FST in order to protect the will being used as a cloak for the shifting intentions of the testator, the reformed rule would mean that if the testator wished his plan to be backed by legal sanctions, he would have to make up his mind as to who was to benefit at the latest by the time he made his will this would ensure that secrecy is indulged but not indecision. - The revised rule could not apply when FST arise on intestacy and would require this (rare) type of fully secret to be treated differently from others.

Fully Secret Trusts validity requirements Crook v. Brooking (1688) 2 Vern 50 origin - FACTS: A testator bequeathed 1.5K to 2 brothers (Simon and Joseph) to hold on secret trust, the terms of which had been communicated on to Simon. Subsequent to the death of the testator, Simon revealed the secret to Joseph. The beneficiaries of the oral secret trust claimed the 1.5K. HELD: as the testator had declared the terms of the trust to Simon, a secret trust existed and was enforceable. - The case demonstrated that, provided that the terms of the trust are communicated to the legatee (or one of them) during the lifetime of the testator, an equitable obligation becomes attached to the legacy. - Accordingly, if an informal secret trust exists, the beneficiary can enforce the trust against the actual receipt of the property. Ottaway v. Norman [1972] Ch 698 test

FACTS: By his will, Harry Ottoway left his bungalow, half of his residuary estate and 1.5K to his housekeeper, Ms Hodges. Before his death, it was orally agreed that she would, in turn, leave by her will the bungalow (and whatever money was left) to Harrys son, William. Ms Hodges later changed her mind and left all the property by will to another. William commenced proceedings against Ms Hodges executor (Mr Norman) for a declaration that the appropriate parts of her estate were held by him on trust for William. HELD: The FST in relation to the bungalow was upheld, but not the trust in relation to the monies. The terms of the trust as regards the latter were too unclear, meaningless and unworkable. The arrangement did not require Ms Hodges to keep the Ottaway money separate and distinct from her own funds, If she had the right to mingle her own money with that derived from Harry, there would be no ascertainable property on which the trust could bit at her death. - In the judgment, Brightman J described Ms Hodges as the primary donee and William as the secondary donee - He outlined 3 essential elements for a FST: - (it is immaterial wether these element precede or succeed the will of the doner) 1. INTENTION: of the testator to subject the primary done to an obligation in favour of the secondary donee 2. COMMUNICATION: of that intention to the primary donee 3. ACCEPTANCE: of that obligation by the primary done either expressly or by acquiescence 4. (RELIANCE) Kasperbauer v. Griffith [2000] WLTR 333 test restated - FACTS: At a family gathering, the testator declared that he was to bequeath his house and a lump sum pension benefit to his wife on the understanding that she would use the money to discharge the mortgage on the house. He explained that the house was to be sold within one year of his death and the proceeds of the sale divided between his children of a former marriage. The wife remained silent throughout the meeting. The testator eventually made a will in a different form than that predicted which ensured that the wife got everything and the children received no benefit. The children alleged that a FST has been established because, at the earlier meeting, the testator had said that the wife knew what she had to do. HELD: This argument failed as the testators words were viewed as being equivocal and sufficient only to impose a moral (ie not a legal) obligation to the wife. The change of emphasis within the will was deemed to be consistent with the absence of an imperative obligation. Re Snowden [1979] 2 All ER 172 burden of proof - Whilst Ottaway claimed the burden of proof should be very high, it is held to be the civil standard of proof. Existence of a secret trust must be shown on a balance of probabilities. - FACTS: A testatrix left the residue of her estate to her brother with whom she had lived for the last 6 months of her life. He died 6 days after the testatrix leaving his son as sole beneficiary of his will. Nineteen relatives challenged the testatrixs will claiming that the brother had received the legacy on secret trust for them. There was a solicitors note indicating that she meant to leave legacies to her relatives, leaving the brother to split up the remainder of the estate. HELD: The standard of proof for establishing a secret trust was the same ordinary civil standard of proof. There was insufficient evidence to show that the testatrix intended to bind the brother by a legally enforceable trust. There was a moral obligation on him to distribute, as she would have done. Consequently, the brother and his son thereafter took the residue absolutely. - The whole point of a trust, secret or otherwise, is that it affixes to the trustee a legal obligation going beyond a moral one. 2.1 Intention (Kasperbauer v. Griffith) - CA demonstrated that a secret trust requires the certainty of intention that it is a trust that is to be created. - the testator, knowing that he was seriously ill, instructed his solicitor to prepare a will in favour of his wife and his two
adopted children from a former marriage. His intentions were communicated to the parties at a family meeting called by the testator, at which he also said that his house should be sold with the proceeds going to the two children. None of this, however, was committed to writing, largely because the testator believed that his wishes would be carried out. On these facts, however, the Court of Appeal held that the testator had not intended to impose a secret trust since his reference to his wife knowing what she had to do indicated only a moral obligation and not a legally enforceable duty.

2.2 Communication

content Wallgrave v. Tebbs (1855) 2 K&J 313 existence of a trust - FACTS: Testator left 12K in his will jointly to Mr Tebbs and Mr Martin. After the testators death, a draft letter was found specifying how the testator wanted them to hold the money. HELD: Because there had been no communication of this to Tebbs and Martin before the testators death, there could be no binding trust. Tebbs and Martin could therefore keep the money. - Wood VC Here there has been no promise or undertaking on the part of the legatee. The latter knew nothing of the testators intention until after his death. Upon the face of the will, the parties take indisputably for their own benefit - A person cannot be bound by an obligation unless it is communicated to him. - This must be before the death of the testator because it is from that point that the trustee will be bound. - If a trustee did not wish to be bound, he must communicate this to the testator. Re Boyes (1884) 26 Ch D 531 terms of the trust (beneficiaries) - FACTS: A testator instructed his solicitor to draft a will leaving all his property to the solicitor absolutely, but to be held by them and distributed according to instructions that were to be subsequently given to him. The will was so drafted but no further instructions were given to the solicitor during the testators lifetime. After the testators death, an unattested paper was found indicating the testators wish that the property should be given to X and Y with a small amount for the solicitor. The solicitor accepting this agreed to hold all but his indicated share on trust for X and Y. HELD: The terms of the trust were not communicated during the testators lifetime. No valid trust was created in favour of X and Y. The solicitor held the property on resulting trust for the estate with the consequence that it would to the next of kin. - Kay J I cannot help regretting that the testators intention of bounty should fail by reason of an informality of this kind, but in my opinion it would be a serious innovation upon the law relating to testamentary instruments if this were to be established as a trust. - The terms of the trust must be communicated to the secret trustee. - Underlying rationale: the trustee must be offered the opportunity to refuse to act as the testator would wish. Re Colin Cooper [1939] Ch 811 trust property - FACTS: A testator communicated his intention to create a secret trust over a fund of 5K. The testator then sought to add more money to the fund at a later date without communicating this intention to the trustee. HELD: The identity of the property must be communicated to the trustee. Any addition to the amount formally orally settled was to be held on resulting trust for the testators residuary estate, and was not to be held part of the secret trust. - There had been no communication or acceptance on the revised terms of the trust. timing all of the above must occur before death - It must be made inter vivos - Communication may occur either before or after the will is drafted. (Moss v Cooper) method o Valid communication can be oral or take the form or a letter, fax, text, message, email or can occur via testators agent (Moss v Cooper) Re Keen [1937] Ch 236 sealed envelope a ship which sails under sealed orders, is sailing under orders though the exact terms are not ascertained by the captain till later (Lord Wright). - FACTS: the testator made his will and this disclosed the existence of a secret trust relating to the sum of 10K. The trustee was handed a sealed envelope that contained the name of the beneficiary. The letter was not to be opened until after the death of the testator. HELD: the trustee had a means of ascertaining the identity of the beneficiary and this amounted to sufficient communication. - It is possible for the terms to be constructively communicated by way of a sealed letter. This may make sense in preventing the secret trustee committing fraud by taking the property absolutely but does not afford the trustee the opportunity to decline the obligation. - This method is acceptable if the secret trustee knows the letter exists and contains trust terms and that the trustee accepts the trust on that basis.

2.3 Acceptance - Acceptance can be made any time before the testators death express or implied (McCormick v. Grogan (1869) LR 4 HL 82) - Assent can occur either expressly or by any mode of action which the disponee knows must give to the testator the impression and belief that he fully assents to the request silence may be enough (Moss v. Cooper (1861) 1 J&H 352) - Extremely low threshold for acceptance because it would be very easy for a secret trustee to pocket the money by not accepting the trust - it must be reasonable for the testator to rely on silence. 2.4 (Reliance) making a will or not changing a will (Moss v. Cooper) not making a will (Strickland v. Aldridge (1804) 9 Ves 516) 3 Half Secret Trusts validity requirements Blackwell v. Blackwell [1929] AC 318 origin - FACTS: A testator by a codicil gave 5 person 12K upon trust to invest as they thought fit and to apply the income for the purposes indicated by me to them with a power to pay a sum of 8K to such person or persons indicated by me to them as they thought fit. Detailed parol instructions were given by the testator to C, one of the trustees. The object and outline was known and accepted by all 5 before the codicil was executed. On the same day, soon after the codicil was executed, C wrote out and signed a memorandum of the detailed instructions. The income was to be applied for the benefit of a lady and her son. The widow and her son brought an action to test the validity of the legacy. - HELD: Parol evidence was admissible to establish a trust. The codicil and memorandum gave rise to a valid trust. - for the purposes indicated by me to them Ottaway v. Norman test Kasperbauer v. Griffith test restated 3.1 Intention (should be clear on the face of the will with half secret trusts) 3.2 Communication content (same as for fully secret trusts existence, terms, property) timing and consistency Re Keen 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. Re Batemans Will Trusts [1970] 1 WLR 1463 be careful with sealed letters in half secret trusts! - FACTS: A testator directed his trustees to set aside 24K from his estate to pay the income thereof to such person and in such proportions as shall be stated by me in a sealed letter in my own handwriting addressed to my trustees. HELD: The direction relating to the sealed letter could not be read as referring only to a past letter but clearly envisaged that the testator might give the trustees a letter at some point in the future. The direction was therefore invalid as an attempt to dispose of the estate by a non-testamentary instrument. The subsequent directions as to the giftover of 24K were likewise invalid. Communication must occur either before the will or, at the very latest, when the will is created. If communication takes place after the will is executed, the secret trust must fail property on resulting trust for the testators estate. To hold otherwise would indeed enable the testator to give then go-by to the requirement of the Wills

Act (Lord Sumner) The testator cannot reserve to himself a power of making future unattested dispositions by merely naming a trustee and leaving the purposes of the trust to be supplied afterwards o This reasoning is unconvincing: it overlooks the ability of the testator to revoke the will and disreagrds the fact that the same reasoning should equally be applied to FST o Requirement of the pre-will communication and acceptance has been rejected in Ireland and Australia. o Thought that this requirement emerged due to an erroneous comparison drawn with doctrine of incorporation by reference which allows written memoranda which is referred to in the will to be allowed in evidence as to the meaning of a testamentary disposition, but the writing must be in existence before, or at the time, the will was executed 3.3 Acceptance (same as for fully secret trusts except for timing) 3.4 Reliance (can only be by making a will due to the timing issue) 4 4.1 Other issues to consider Contradiction in the terms of the will in other respects, may the secret trustee take the property beneficially? Re Rees [1950] Ch 204 - FACTS: A testator died and appointed a friend and a solicitor as his executors and trustees, stating that they knew his wishes as regards the property. The testator had told them to make certain payments but to keep the remainder for themselves. There was a surplus after these payments were made. The executors argued that they were entitled to keep the surplus. HELD: The executors could not keep the surplus as a fiduciary obligation had been imposed on them. Evidence the testators intention was not admissible, as the will clearly showed an intention to create a trust. Evidence that the executors were to take the remainder of the properly absolutely would contradict the will. - The court suggested that, since one of the executors was a solicitor, he should have ensured that the will was drafted in a clear manner so that the executors could take benefit under the will rather than by use of a secret trust. - Evidence can be adduced only to complement the terms and not to be in conflict with those terms. Re Tyler [1967] 1 WLR 1269 4.2 5 What if the secret trustee witnesses the will (s.15 Wills Act 1837)? Theoretical rationales and concepts

5.1 Equity will not allow a statute to be used as an instrument for fraud (can only really apply to fully secret trusts) McCormick v. Grogan - If the trustee attempts to keep the property got himself, this will be clear fraud and the trustee will profit from his misconduct. As such, the justification for the FST is easily made out. - HST: As the trustee will not profit from a failure of the trust (held on resulting trust for the testators estate), it is hard to speak in terms of there being a fraud in connection with a half secret trust. Blackwell v Blackwell: For the prevention of fraud, Equity fastens on the conscience of the legatee a trust, a trust, that is , which would otherwise be inoperative; in other words it makes him do what the will in itself had nothing to do with, it lets him take what the will gives him and then makes him apply to apply it, as the Court of Conscience directs, and it does so in order to give effect to the wishes of the testator, which would not otherwise be effectual. (Lord Sumner) Fraud is committed on both the testator and the beneficiary if the trust is not upheld: o This view is normally expressed in this way. If evidence of the terms of the trust were not admitted contrary to the provisions of the Wills Act, the testator would be defrauded in that, on the faith of the promise made by the secret trustee, he had either made or revoked a

disposition of his property. In the same sort of way, the beneficiaries of the secret trust would be deprived of their beneficial interest. (Parker and Mellows) o Problem with this argument: there is no real fraud on the beneficiary instead the intended beneficiary loses out because the settlor did not adhere to the prescribed formalities for creating a testamentary trust. 5.2 Incorporation by reference (can only really apply to half secret trusts) Johnson v. Ball (1851) 5 De.G.& Sm 85 - FACTS: The testator bequeathed the proceeds of a life assurance policy to 2 trustees to hold the same on the ses appointed by letter signed by them and myself. Although no such letter existed at the date of the will, the testator had orally communicated the terms of the trust prior to the execution of the will. The letter was written much later. Following the death of the testator, one of the secret beneficiaries claimed her share. HELD: The claim was dismissed because no effectual communication to the trustees had bee made. - Matthews explains the decision as reflecting the inability to incorporate the document by reference where it is created after the will. He concludes that it must necessarily follow that HST are based upon the applicability of the rule of incorporation. - Johnson case may be sound authority on the central notion of incorporation that, as the will must refer to the document to be incorporated, the document must be in existence prior to the will. But it cannot be viewed as rationale underpinning HST o Johnson case shows that the evidence adduced to establish HST cannot contradict the terms of the will o Incorporation theory stands in contradiction to key authorities o Lacks force in that the communication in relation to HST may be oral, and hence there may be no document at all that can be incorporated into the will. o Reference in the will to the communication of terms may be general, whereas for the incorporation by reference of a document into a will specificity is required to identify what document is to be read alongside the will. There are significant difference between IBR and HST, and it is argued that because of these, IBR cannot be a justifiable rationale for HST: o Oral trusts can be used in HST, but must be in writing for IBR o General reverences can be set out on the face of the will in HST o Names of beneficiaries can be kept secret in HST

5.3

Secret trusts arise dehors (outside) the will as an inter vivos trust - a secret trust does not run contrary to Wills Act because it operates outside the will and its existence is not dependent upon the finding of fraud or the terms of the will - trust arises not from the will but from its lifetime communication to and acceptance by the trustee. - Mergarry VC Re Snowdon: the whole basis of secret trusts is that they operate outside the will, changing nothing that is written in it, and allowing it to operate according to its tenor, but then fastening a trust on to the property in the hands of the recipient. - It follows that the rules governing the wills should not apply to secret trusts. o Re Young

would apply to both fully secret trusts and half secret trusts which makes a nonsense of the timing differences Blackwell v. Blackwell: Viscount Sumner admitted it is communication of the purpose to the legatee, coupled with the acquiescence of promise on his part, that removes the matter from the provisions of the Wills Act and brings it within the law of trusts, as applied in this instance to trustees, who happen to be legatees. can a secret beneficiary witness the will (s.15 Wills Act 1837)? Re Young [1951] Ch 344 - if the trust is created dehors the will then the beneficiary does not benefit from the will but by the declaration of trust made in the testator's lifetime. - FACTS: The testator gave a bequest to his wife with a direction for her to make small legacies in

accordance with his wishes. Prior to the execution of the will, the testator told his wife that he wished his chauffeur to receive a sum of 2K. The chauffeur was one of the witnesses to the will. HELD: The chauffeur was entitled to take the legacy as the secret trust operated outside the Wills Act 1837. The beneficiary under a secret trust can claim the interest under the trust even though he or she was a witness to the will. The whole theory of the formation of a secret trust is that the Wills Act has nothing to do with the matter.

can a secret beneficiary who predeceases the testator benefit under the will? Re Gardner (No.2) [1923] 2 Ch 230 - FACTS: A testatrix left her estate to her husband, stating that he would carry out her wishes. The testatrix wished the estate to be divided on her husbands death between three beneficiaries, on of whom predeceased the testatrix. HELD: The beneficiarys personal representative could claim on behalf of the deceased beneficiary under the secret trust. - Where the beneficiary under a secret trust predeceases the testator, his estate may nonetheless benefit under the trust. - The normal rule of succession is that a beneficiary under a will must survive the testator. However, in this case, the courts view was that as a secret trust existed outside the will. The fact the beneficiary predeceased the testatrix did not matter. The court decided that a secret beneficiary becomes entitled upon the creation of the secret trust not on the death of the testatrix. This is unsatisfactory as it ignores the fact that the will could be changed by the testatrix at any time prior to the death and could terminate the trust. ISSUE: The trust is not completely independent of the will, as it is the will that operates to vest title to the property in the secret trust. o If the will is defective (eg improperly attested or testator does not have the legal capacity to create it) the secret trust must fail. Penner: the dehors the will theory is fundamentally unsound the theory should be called the dehors the Wills Act theory to reflect what it means. o Secret trusts are testamentary dispositions and, simply by revoking the will or drafting a new will, the testator can prevent the trust being constituted. o Just an attempt to cloak the embarrassing jam equity has got itself into with its willingness to flout the Wills Act.

5.4

Are secret trusts express or constructive trusts? Sheridan argues that the secret trust which arises without mention in the will (or in intestacy) is a contrastive trust, not an express trust on the ground that where a person has by representation acquired property which it would be inequitable for him to keep, a contrastive trust must arise. Further it makes no difference whether there was a transfer by will (as with FST) or there is an inter vivos transfer the same rule applied. Sheridan explains: the fact that the transaction is a secret does not make it different in principle. It is but one illustration of the broad principle of constructive trusts, and should be so recognized. With HST, Sheridan contends that this must give rise to an express trust created by will: That much is clear, for whatever else happens or does not happen, there is a binding trust; the contest is only as to who is the beneficiary. There is certainly no question of the legatee obtaining property which it is inequitable for him to keep Hodge believes that both HST and FST are express trusts in both cases the trust arises from the expressed intentions of the deceased communicated to and accepted by the trustee in the testators lifetime. The express trust model represents the majority thinking as to the nature of secret trusts. o If a secret trust of land is classified as an express trust, it should be evidenced in writing by virtue of s.53.1.b of the Law of Property Act 1925

express inter vivos trusts of land must meet formality requirements (s.53(1)(b) LPA 1925) Re Baillie (1886) 2 TLR 660 oral half secret trust of land invalid - express trust

Ottaway v. Norman oral fully secret trust of land valid Kasperbauer v. Griffith constructive trust approach Even if a secret trust is designated as an express trust, the absence of formality would be overlooked so as to prevent fraud. A constructive trust would emerge from the ashes of the express trust, and as implied trusts are exempt from formalities (s.53.2), this remedial trust would ensure that the secret trust is enforceable The same outcome would be reached regardless of whether the secret trust is in itself express or constructive. END

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