#3128 - Secret Trusts, Purpose Trusts And Unincorporated Associations - GDL Equity and Trusts

Secret Trusts

• - Secret trust: trust to take effect on death not mentioned/fully disclosed in will.

  - Exempt from testamentary trust formalities (s9 Wills Act 1837): (a): in writing, signed by testator; (b): intended to be given effect by testator; (c): witnessed + attested by 2 or more witnesses.

  - Justifications.

  • 1. fraud theory: fraud vs. settlor if t. keeps gift (McCormick v Grogan) – but does not work for HST.

  • 2. dehors the will theory: trust declared inter vivos, merely constituted on death (Blackwell v Blackwell).

  - Proof: burden on person claiming trust; standard: balance of probabilities (Re Snowden).

  1. Identify type: Fully Secret Trust or Half Secret Trust?

  - FST: apparent outright gift to intended t.

  • if intention not communicated: absolute gift.

  • if intention communicated but trust fails: RT.

  - HST: gift in will to t. ‘on trust’, but terms not specified.

  • if trust fails: RT.

  2. Requirements: i. Intention; ii. communication; iii. acceptance by t.; iv. reliance by testator (Kasperbauer v Griffith).

  - Communication.

  • Content (mirrors 3 certainties: deal with at same time).

    • a. fact/existence of trust (Wallgrave v Tebbs: orders to hold on trust not given before death took free).

      • certainty of intention (Kasperbauer v Griffith: ‘wife knows what she has to do’ too vague).

    • b. terms of trust (Re Boyes: testator failed to give promised instructions before death RT).

    • c. property subject to trust.

      • Re Colin Cooper: addition of 5k by codicil to existing 5k ST not communicated RT of 2^nd 5k.

      • Marguiles v Marguiles: proportion of property unclear RT.

  • Method (Re Keen)

    • generally: oral/writing.

    • sealed envelope opened on death IF t. aware (Re Keen, [Ld Wright]: cf. ship sailing under sealed orders).

  • Timing

    • FST: any time before death (Wallgrave v Tebbs) – unless Re Stead exception applies (see below).

    • HST: before/at time will executed (Re Keen; Re Bateman) + must be consistent with will (Re Keen).

      • rationale: prevent testator bypassing s9 Wills Act (Blackwell v Blackwell, [Vis Sumner] obiter).

  • To Whom?

    • general rule: all trustees.

      • if not: only those to whom communication made bound (Wallgrave v Tebbs; Moss v Cooper).

        • FST: if not communicated to 1 takes share absolutely.

        • HST: if not communicated to 1 holds on RT for settlor.

    • exception for FST: bequest to joint tenants if comm. to 1 before will executed (for FST) (Re Stead).

      • if fails: t. told bound, others ts. take absolutely.

      • HST: Re Stead prob. does not apply (comm. to all ts. must be before will anyway).

  - Acceptance by t.

  • can be implied (silence, conduct) (Moss v Cooper) – but: may be challenged in future.

  • testator must have reasonable belief in acceptance.

  - Reliance on acceptance by testator – must be reasonable (Moss v Cooper).

  • a. makes gift/new will.

  • b. (FST only) leaves gift unrevoked (Moss v Cooper).

  • c. (FST only) refrains from making will (Stickland v Aldbridge) – dep. on statutory heir being secret trustee.

  - Means of carrying out ST immaterial: inter vivos transfer to b. or obligation to make will in favour of b. (Ottaway v Norman).

  3. Other Issues

  - Beneficiary predeceases testator.

  • general rule: gift lapses property to testator’s residuary estate.

  • Re Gardner (No 2), [Romer J]: dehors the will – STs take effect inter vivos (from comm. + accept.) to b’s estate.

    • but dubious: ignores rule of constitution (not until death) + undermines revocability of will.

    • may not be followed: only HC case.

  - Beneficiary witnesses will.

  • general rule: s15 Wills Act 1837: witness cannot benefit under will (rationale: coercion).

  • Re Young, [Danckwerts J]: following Re Gardner (No 2), b. benefits under inter vivos trust, not will s15 not apply.

    • but dubious.

    • limited application?: not if secret b. knows they are b. (Re Young: b. did not know no duress).

  - Trustee witnesses will.

  • general rule: s15 Wills Act 1837.

  • HST: no problem – will shows that trustee, so no benefit (Creswell v Creswell).

  • FST: more problematic – appears as outright gift to t. – but: does not take beneficially s15 may not apply.

  - Death/disclaimer by trustee: position unclear.

  • Re Maddock (CoA obiter): possible – trust not constituted till death trust fails if t. predeceases/disclaims.

  • Blackwell v Blackwell (HoL obiter): not possible – FS trustee cannot defeat trust by renouncing.

    • rationale: otherwise acceptance not binding.

    • + HST?: equity will not permit trust to fail for want of trustee.

  - Secret trust of land: express ( must comply with s53(1)(b) LPA 1925) or constructive ( no formalities: s53(2) LPA 1925)?

  • case law inconclusive:

    • FST of land: constructive (Ottaway v Norman, BUT: s53(1)(b) not considered).

    • HST of land: express (Re Baillie, BUT: before HST formally recognised).

  • academic theory:

    • FST of land: constructive – justified by prevention of fraud (Kasperbauer v Griffiths obiter).

    • HST of land: express – referred to in will + fraud theory does not apply.

    • [Paul Todd]: both FST + HST based on equity if not defeated by s9 Wills Act 1837, should not be defeated by s53(1)(b) LPA 1925 – but weak argument.

      Purpose Trusts

  - Beneficiary principle: non-charitable trust must have ascertainable beneficiary who can enforce terms (Morice v Bishop of Durham, [Grant MR]; confirmed in Re Astor’s ST).

  - Exception: charitable purpose trusts – A-G enforces on public behalf; no perpetuity issues.

  - CL exceptions (Re Endacott, [Ld Evershed MR]).

  • 1. monuments + graves (Mussett v Bingle: trust to erect monument valid, but maintenance trust void for perpetuity).

    • poss. charitable: if (1) attached to church or (2) in churchyard + trust for churchyard in general (Re Douglas).

      • e.g. Re Hooper: trust for upkeep of tablet + window in church charitable; trust for maintenance of graves in churchyard valid PPT.

    • N.B. monument = small (CL definition).

  • 2. private masses (Bourne v Keane).

    • poss. charitable: if public (Gimour v Coats: not cloistered nuns).

  • 3. individual animals (Pettingall v Pettingall: mare; Re Dean: horses + hounds for up to 50 years).

    • but N.B. Re Kelly (Irish): need valid perpetuity period – NOT based on animal life.

  • trusts of imperfect obligation: dep. on willing trustee + cannot be enforced (Re Endacott; Re Thompson).

  - Exception: purpose trust for identifiable individuals (Re Denley’s Trust Deed: trust of land as sport ground for co. employees, with gift over to hospital after specified perpetuity period [Reginald Goff J]: upheld).

  • rationale: identifiable persons have right to enforce obligation beneficiary principle satisfied.

  • requirements:

    • 1. ascertainable ‘beneficiaries’.

    • 2. bs. draw tangible benefit locus standi to sue.

    • 3. valid perpetuity period.

    • (+ gift over?: Re Horley Town FC: Re Denley unsafe basis for decision if no gift over).

  • BUT criticised: between purpose trust + trust for people – bs. have locus standi but not Saunders v Vautiers rights.

    • alt. interpretation: discretionary trust? (Re Grant’s WT, [Vinelott J]. Re Horley Town FC, [Collins J]).

    • app. to gifts to UIs? (Re Lipinski’s WT – see below).

  - Trusts limited by purpose: valid – purpose construed as mere motive (Re Bowes: trust to plant trees absolutely entitled).

  - Perpetuity period: purpose trust may be void for breaking rule against inalienability.

  • CL rules apply (s15(4) PAA 1964 + S19 PAA 2009: do not apply to PPS).

    • 1. specified time period of up to 21 years; or

    • 2. lifetime of specified life/lives in being + 21 years (inc. royal life clause); or

    • 3. ‘so long as the law allows’ (Re Hooper): 21 years read in – but MUST BE STATED: not by default.

  • from outset: must be clear that trust will end before perpetuity period if not: void.

  • anomalous cases:

    • upkeep of partic. animal: courts have taken judicial notice that unlikely to live 21 yrs (Re Dean; Re Haines).

      • but criticised: animals NOT lives in being + should not presume will die (Re Kelly (Irish)).

    • maintenance of monuments/graves (Mussett v Bingle: bequest to build monument allowed assumed would take place within 21 years (but not bequest for maintenance)).

      • but dubious (Re Kelly: cannot presume termination in time.)

        Unincorporated Associations

  - Definitions:

  • Leahy v AG for NSW, [Viscount Simonds]: collective body of individuals which does not have its own separate legal personality.

  • Conservative and Unionist Central Office v Burrell, [Lawton CJ]:

    • 2+ people bound together for common non-business purpose.

    • mutual rights + duties arising from undertakings between them (e.g. constitution, rules).

    • rules identifying who controls org. + funds, + terms on which exercised.

    • can be joined/left at will (i.e. voluntary: but can be conditions, ratification etc.).

  - Gifts to UIs: different interpretations developed to enable gifts to be upheld (Re Recher’s WT).

  - 1. Gift to present members beneficially (immediate) – v. rare.

  • treated as gift to multiple individuals: each take share (Cocks v Manners: gift to convent individual nuns).

  • BUT: must reflect settlor’s intentions (Leahy v AG for NSW: farm on trust for nuns + monks not gift) – factors:

    • 1. wording of gift: ‘on trust’ for orders of nuns/monks unlikely gift intended.

    • 2. nature of beneficiaries: members numerous + spread across world unlikely legacy to each intended.

    • 3. subject matter (must be easily divisible): 730 acre farm unlikely each member intended to have plot.

  • now: only when group name used as label for members (Re Grant’s WT, [Vinelott J]): small, fixed groups.

  - 2. Gift for present and future members – hypothetical: never applied.

  • requires:

    • intention: ascertainable bs. + clear intention (express words or endowment).

    • valid...