Following this failure of the trust, there is the question of what will happen to the property. intention, This agreement must amount to a clear contract in law, Conduct may infer an agreement to create a Mutual Will, but usually it is cited in the Wills itself that the wills are mutually binding, See the cases of Re Oldham [1925] and Re Cleaver [1981], If the Mutual Will is broken by the first person, their estate is liable in damages: Robinson v Ommanney, For a long time it was assumed no remedy could be obtained against the second party to die, due to the privity doctrine however, it may now be possible for the beneficiary to enforce the contract in his own right under the Contracts Act 1999, Nevertheless, if a Mutual Will creates a trust in favour of a beneficiary they can enforce the trust against the survivor: In the Goods of Heys [1914] and s7(1) Contract Act 1999, FOOL-PROOF methods of obtaining top grades, SECRETS your professors won't tell you and your peers don't know, INSIDER TIPS and tricks so you can spend less time studying and land the perfect job. This is not possible in half secret trusts: unlike fully secret trusts, intention is obvious as it is stated in the will. 310 words (1 pages) Case Summary. Tough actively assisting in a breach of trust. However, Alastair Hudson observes that there is alternative authority[xv] from Romer J in Re Gardner. [xvi] It was held by Romer J that the gift is created at the date of the will, not on the date of the testators death. Contract to sell land is specifically enforceable where damages is inadequate. There are three requirements for a secret trust: (1) intention to create the trust; (2) communication of the trust to the trustee (which is subject to slightly different rules on timing depending on whether the trust is half-secret or fully secret) and (3) acceptance of the trust by the trustee. Become your target audiences go-to resource for todays hottest topics. Honesty is irrelevant i.e. See also Kasperbauer v Griffith [2000] WTLR 333. [ii] Alastair Hudson Understanding Equity & Trusts (9th edn, Routledge, 2015) 70. Learn faster with spaced repetition. Communication of trust by trustee ('outside will') o 3. It was stated in Ottoway v Norman[xii] that the acceptance could be express or by acquiescence. The jewellery had belonged to one Ms Richards. During the nineteenth century, the courts developed the twelve principles, or maxims, of equity, when administrating its equitable jurisdiction. But the manner in which those wishes had been expressed and the fact that Ms Richards wishes were not (as the Court found) for the Claimant to be the sole recipient of her jewellery, led to the conclusion that the answer to the question had Mrs Richards intended her wishes to be sanctioned by the authority of the court? was: no. As Hudson notes the purpose of equity is to introduce fairness in circumstances in which statute might permit unfairness[xlvi] thus is not surprising that the Courts have applied the principle to secret trusts in this way. When the trustees are co-owners, it is essential that the trust is communicated and accepted by each co-owner individually, unless they are joint tenants, where the acceptance of one will suffice. In a very unusual case, the Court of Protection has sentenced a woman, a Ms Griffith, to 12 months imprisonment for forging a court order so as to obtain medical records in relation to P, her relation. Fully explain and analyse the law relating to secret and half secret trusts and critically evaluate the following statement: The enforcement of secret and half secret trusts demonstrates the equitable principle that statute and common law shall not be used as an engine of fraud and illustrates the willingness of equity to contravene statutory principles to achieve a result which the court considers to be in line with good conscience., In order to give full consideration to the issues arising in this question, this essay will first detail and analyse the law behind secret and half secrets, including the differences in their formation, validity and the consequences in the event that a secret trust fails. The beneficiary claiming under the trust must prove that what the testator formally provided by his will is not what he actually intended to provide, but judicial opinion is divided on the appropriate standard of proof. This is certainly true; for a claimant who contesting a will based on the testators intentions, the standard of proof is high, and it was indicated by Brightman J in Ottoway v Norman[xix] that a similarly high standard should be applied to an individual claiming that they are entitled under a secret trust. The relevant principle, statute and common law shall not be used as an engine of fraud was developed by the courts to prevent the taking advantage of statutory formality provisions, this equitable principle essentially aims to allow equity to intercede if a claimant attempts to rely unconsiousably on a lack of statutory formalities It was held initially in Rouchefoucauld v Boustead[xxxv] that legal formalities will not be demanded by the court if they are used in an attempt to commit a fraud and the principle has thus been used to disregard a formality in order to give effect to the trust. It thus follows the trust is created dehors the will and is not opposing Wills Act. The next generation search tool for finding the right lawyer for you. Validity: Secret trusts appear to be exempt from statutory formalities. Re Keen 1937 For HST communication must be before execution of will, in accordance with will and sealed letter is sufficient. The jewellery had belonged to a Ms Richards, who died childless and left her whole estate to her friend, Mr Ison. Hence it appears that the principle does go some way to allowing the courts to reach decisions they find in good conscience., Equally, Emma Warner-Reed cites the example of section 37 of the Matrimonial Proceedings and Property Act 1970. The equitable principle that statute and common law shall not be used as an engine of fraud is one of two justifications behind the enforcement of secret and half secret trusts. A fully secret trust involves property being left by a testator to a legatee as a gift on the face of the will, without explicitly stating that the legatee holds the property on trust for a separate part. This was confirmed by the Court of appeal in Kasperbauer v Griffith [2000]. [xxxix] J E Penner The Law of Trusts (9th edn, OUP, 2014), 176. Gorney watched all of this from his hiding place. [xxiii] Lesley King In Practice: Legal Update: Probate: Secret and half-secret trusts (2014) LS Gaz 8. The Judge overseeing this case is Cohen, Kyle S. The case status is Disposed - Other Disposed. xcd```d`Lw@_@UH;/GL@3#st, &c0"@3` D "@7 Kasperbauer v Griffith [2000] (w.r.t legal obligation) Definition. o, Hodge: thinks it's a fraud on both the testator and the secret beneficiary - but theory only really works with FTF (as with HSF it is clear there is a trust on the face of the will), HSF: Blackwell and Blackwell - they happen outside the will - so we endorse themSo we circumvent the statutory formalities of s9 of the Wills Act, Secret trust operates by the declaration - not inside the will, Re Gardner (No. On 07/30/2020 Kasperbauer, Laura L filed a Family - Marriage Dissolution/Divorce lawsuit against Kasperbauer, Richard J. [i] Gary Watt Trusts and Equity (4th edn, OUP, 2010) 180. It is sufficient that a restraint of trade or monopoly results as the consequence of the defendants' conduct or business arrangements. It is submitted overall that stimulus question is partially correct, but requires rephrasing. No. Also, It is essential that the terms of the intended trust are consistent with the later will. If these three conditions, specifically intention, communication, and acceptance are not satisfied, the secret trust will not be held as valid. There are no well-defined circumstances in which a court will determine a constructive trust, But there are common circumstances in which constructive trusts have been found (see below), The weak unifying factor to all circumstances in which a constructive trust arises, is usually the legal owner has conducted himself in such a way it would be unconscionable for them to maintain their property, LJ Millet: A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property to assert his own beneficial interest in the property and deny the beneficial interest of another Paragon Finance v Thakerar [1999], There exists an institution/remedial dichotomy, The institutional approach limits constructive trusts to defined sets of circumstances, so limits the judges discretion in deciding when and how to adjust a persons beneficial interest, In Westdeutsche Landesbank v Islington, Lord Browne Wilkinson said an institutional constructive trust arises by operation of law as from the date of circumstances which give rise to it: the function of the court is merely to declare that such trust has arisen in the past, Most common law countries use the remedial approach (e.g. Constructive trusts are imposed where property is gained through fraud (Rouchefoucauld v Boustead 1897), However, if there is fraudulent misrepresentation, the constructive trust will not arise unless the contract is voided: Lonrho v Al Fayed (No 2) [1991] this is because the victim of the fraud may wish to affirm the transaction despite the fraudulent misrepresentation, Also see the cases of Rochefoucauld v Boustead [1897] and Bannister v Bannister [1948], Bribes and secret comission are essentially synonymous, Any bribe taken by a fiduciary will be held on constructive trust by that fiduciary for the beneficiaries of her fiduciary office this principle has, however, been doubted in recent cases, In Lister v Stubbs, it was held that the claimant could not claim title to the property acquired by the bribes, Reading v Attorney General [1951] took a different view, where the court seemingly awareded a propriety remedy over the bribes, In Attorney General of Hong Kong v Reid [1994], the Privy Council overruled Lister v Stubbs and held that a proprietary constructive trust is imposed as soon as the bribe is accepted by its recipient, But then Sinclair Investments v Versailles Trade Finance Ltd [2011] came and cast doubt on the Reid principle the court of appeal held in this case that there should be no constructive trust as to maximise assets available to unsecured creditors, A constructive trust will be imposed in circumstances in which the claimant has refrained from exploiting some commercial opportunity in reliance on some agreement or pre-contractual understanding reached with the defendant i.e. Under this section, a spouse who makes a substantial financial contribution to improve a property is treated as then acquiring a share in its beneficial interest, whether or not they have a legal interest. Watt writes that the secret trust may initially have been created in response to the worries of men wishing to make provisions for a mistress and illegitimate children, and it was in reaction to this that the judges of the Chancery division permitted the creation of secret trusts, despite the lack of formality required by the Wills Act.[i]. Part of the evidence was a solicitors note which suggested that that she meant to leave legacies to her relatives and that her brother was to divide up the remainder of the estate. Thus the property that was clearly identified passed to the claimant. This will involve a brief explanation of the equitable principles before turning to their application to secret trusts. The Vendor must take reasonable care of property until the transfer is completed (Englewood v Patel 2005). The rationale behind these consequences is that the intention and communications have not been complied with. The defendant approached a petrol station manned by a 50 year old male. Summary. As well as setting out the requirements of a valid fully secret trust, Ottoway v Norman[v] highlighted, in particular, the significance of the communication of intention requirement. However, Lord Hatherley LC used this case to make it clear secret trusts are imposed to prevent the defrauding of a testator by a trustee, as the property was left to the trustee in reliance of the promise to carry out the testators wishes. It may be unconscionable to keep the money after the mistake has been bought to the attention of the recipient. However, the court was not willing to disregard the importance of the will in this case; it will not contravene statutory principle in every situation, whereby the trust terms are not certain. Summary - lecture 1-5 - comparison of realism and english school theorist ; Vectors Notes - EngineeringMaths2017 . s 53(1)(b) was not complied with). Each of these will be discussed in turn. The solicitor did not acquire the details of the trust terms until after the testators death. By the same token, it will be seen that this principle is not the only justification behind the enforcement of secret trusts, and that dehors the will acts as an alternate theory. Copyright 2006 - 2023 Law Business Research. However, this equitable principle was employed to rule that the agreement was enforceable as a constructive trust, notwithstanding the fact that it was oral, and Ms Bannister was a tenant for life. In general, it is assumed that the trust is created upon the testators death, wherein legal title passes to the secret trustee. By not naming the beneficiary or beneficiaries of the property, these gifts do not fulfil the requirements of section 9 of the Wills Act 1837 regarding the proper disposal of property on death. The principle that equity will not be an engine of fraud is applied to uphold secret trusts to ensure that the testators wishes are complied with as far as possible, but the three requirements of intention, communication and acceptance ensure that the equity is retrained from making decisions purely because it considers them in line with good conscience.. endstream endobj . After this, Keen executed his will and it only made references to disposition that may be made after the wills execution it did not make mention of the trusts already created. A point of discussion was the burden of proof upon the claimants. A recent example of this was the estate of the painter Lucian Freud: Re Freud [2014] EWHC 2577 in which the claimant executors who were beneficially entitled to the whole residuary estate on the face of the will made clear that they had received the estate subject to a fully secret trust. In the case of Re Stead,[vi] there were two trustees, but the testator only informed one of their intentions. Failure for the trustee to carry out this promise would be unconscionable, [41] something that Equity attempts to prevent, as stated by Gibson LJ in Kasperbauer v Griffith. Section 9 states that, for a will to be valid, it must be in writing, signed by the testator and witnesses by two persons. the will doesn't say where the property should go, Fully secret trusts are frequently identified as constructive trusts (Oakley 1997), whereas half-secret trusts are often considered to be a species of express trust because they are disclosed on the face of the will (Martin 1997), Hudson argues all secret trusts ought to be considered constructive trusts effected to provide an exception to the Wills Act 1837 and thus prevent a legatee under a will from asserting an unconscionable beneficial title to property, Usually to keep the identity of the beneficiary secret, or to benefit an illegitimate child with a mistress. He argues this theory relies upon the establishing that secret trusts, to fall out of the remit of the Wills Act, are not actually testamentary dispositions at all, thus the Acts formalities need not apply, which is factually untrue. From our private database of 35,600+ case briefs. [xxxiv] Simon Gardner Two Maxims of Equity (1995) 54 (1) CLJ 60, 61. Secret trusts may be enforceable despite not conforming with the Wills Act. Secret trusts therefore arise where a testator decides to leave ostensible legacies to someone whom the testator really wants to act as trustee for an intended but undisclosed beneficiary of that legacy provided always that the obligation is a trust obligation and not merely a moral obligation: Under the general principles of constructive trusts, it would be unconscionable for the fraudster to retain property acquired by fraud (, In Re Ciro Citterio Menswear, land was acquired by 2 directors, by money was loaned to the company in breach of the Companies Act 1985. First in Kasperbauer v Griffiths [2000] WTLR 333 the Court of Appeal had summarised the law in this area and pointed out that the question was whether the testator intended a trust or ' a mere moral or family obligation .' To use the Law of Property Act 1925 to defeat Ms Bannisters beneficial interest would be a fraud. If a the three requirements are not met, communication did not take place before or at the time of the will or all the trustees are not informed, the trust will fail and the property will revert back to the testators estate. Death or Disclaimer by Trustee (Blackwell v Blackwell cf Re Maddock) Where a trustee of a half-secret trust dies, the trust still subsists because Firstly, as articulated above, it is stated that the property is to be held on trust, unlike fully secret trusts where this is not mentioned in the will. An alternate (but weaker) theory: dehors the will, However, it is false to state that is solely thus equitable principle that enables the enforcement of secret trusts. And where the trust alleged has been created informally, a central issue for the Court will often be whether the testator actually intended to create a trust at all. No. Why should equity, over a mere matter of words, give effect to them in one case and frustrate them in the other?[xxv], Blackwell v Blackwell[xxvi], described by Watt as a classic instance of a valid half secret trusts[xxvii] is the basis for another noteworthy requirement regarding half secret trusts. Likewise, in Re Keen[xlv], it could be said that it would be in good conscience to uphold the trust as had been communicated and accepted, and it need not matter that the will did not refer to it. The identities of the beneficiaries were orally communicated to the secret trustees and one of them had been given more detailed directions by the testator. 2023 Digestible Notes All Rights Reserved. Lloyds Bank v Rosset [1991], Also see the case of FHR European Ventures LLP v Cedar Capital Partners LLC [2014]. Inevitably, however, secret trusts often arise, or are alleged to arise, where the terms of the trust have not been committed to writing in full or at all. In a fully secret trust, there are two possible scenarios. Following the death of the first party, the second party holds the property on a constructive, FHR European Ventures LLP v Cedar Capital Partners LLC [2014], Chase Manhattan v Israel-British Bank [1981], Westdeutsche Landesbank v Islington [1996], Attorney General of Hong Kong v Reid [1994], Sinclair Investments v Versailles Trade Finance Ltd [2011], Thus, a person who steal property will have dealt unconscionably with it (Westdeutshe Landesbank); a person who receives a bribe in the conduct of a fiduciary office will have dealt unconscionably with the property representing that bribe (AG for HK v Reid 1994); a person who takes property by means of fraud will have dealt unconscionably with it (Westdeutshe Landesbank) the defendant will be a constructive trustee in all these cases, Institutional constructive trusts arise at the moment the conduct occurs, on the facts, Remedial constructive trusts arise at the date of the courts judgment, He says a remedial constructive trust is different as it lies in the discretion of the court, E.g. If the intended sanction was the authority of the court, a trust is created. [at para 85] per Etherton LJ for a summary of the view that such trusts do not always depend on the establishment of any actual agreement. 157, 161. In Titcombe v Ison there was no doubt that the testator had expressed informal wishes regarding her jewellery. In modern terms, this means communication can take place in email or text message. Proprietary estoppel requires the elements of representation, reliance and detriment. 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