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In 2014, David died.  Probate was granted to Gareth.  When, after David’s death, the envelope was opened, the name of the intended beneficiary was found to be that of Margaret, the mother of Steven. Meanwhile, Mohammed is confused because he still does not know the identity of the secret beneficiary to whom David alluded in 1999, and Adnan is adamant that he can keep his share of the £5,000 for himself.

Advise as to the validity of any secret trusts that may have been created.

Would it make any difference if:

(i)Lisa had ignored David’s instructions and opened the envelope before David’s death, or

(ii)In 2001, David had confirmed his will by codicil?

(iii)The £10,000 had been expressly left to Adnan and Mohammed ‘as joint tenants’ (assuming: a) that David did not confirm the will by codicil in 2001; and b) that he did confirm the will by codicil in 2001).

Evaluate in depth knowledge and understanding of the principles of equity and trusts, demonstrating the appropriate intellectual and practical skills needed to research and analyse the law effectively using resources to retrieve and evaluate information.

Critically analyse the principles of equity and trusts to problem situations and thereby demonstrate an ability to provide reasoned solutions addressing complex actual or hypothetical problems.

Critically evaluate the underlying principles of equity and trusts in terms of doctrinal coherence acting independently in planning and managing tasks with limited guidance in areas they have studied, including the ability to reflect on their own learning, developing intellectual independence.

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Definition of Equity and Trusts

Equity can be defined as a spate body of law which has been initiated in the court of chancery, which corrects, controls and supplements the common law rules. Equity is also a right recognized by the court.  According to  James Penner trust is defined as a device through the application of which a person is made responsible for holding a property for another person’s benefit.   Personal equitable obligations are imposed by a trust in a person for the purpose of making them able to manage the property for another person’s benefit or for advancing a charitable or private purpose. In order to create a trust there has to be proper certainty in relation to the subject matter, object and intention of creating the trust. The person who is provided the responsibility to manage the property is known as a trustee and the person for whom the property is held for is known as beneficiary. There are various kinds of trusts which can be created under equity, however for the purpose of this paper the primary focus is going to be on a secret trust. The paper will apply the rules of secret trust in order to determine whether a secret trust has been created or not in the provided situation. The rules are also applied to determine whether David confirm the will via the utilization of codicil in the year 2001 and the position of Adnan and Mohammed in relation to the money held by them as joint tenants.

As stated by Philip H Pettit any person known as a testator who has the intention of keeping a form of legacy secret form the families as well as the public at large has the right to creating a secret trust. Formally any testator who wanted to provide property to illegitimate family members created a secret trust. There are two forms of secret trust fully secret trust and a half secret trust. In case of a fully secret trust the testator provides apparently absolute legacy to a person having an understanding that the gift would be held by the person for the beneficiary. In case of a half secret trust the testator provides legacy to a person and the will states that the person will hold the gift as directed to him, Although the trust is not secret anymore but the terms of the trust are. There are various cases at law where the requirements in relation to a secret trust have been discussed. One of the cases is the case of Ottaway v Norman [1972]. In this case it has been stated by Brightman J that the basic requirements for the creation of a secret trust include intention of the testator to put the legatee to trust obligations in favour of the beneficiary, communicating the intention to the legatee and the acceptance of the obligation which has been imposed on the transferee. There is certain situation where the testator has to communicate the terms of the fully secret trust or half secret trust to the trustee. In case of a fully secret trust the communication can succeed or precede the will execution and in case of a half secret trust communication and acceptance has to be before or at the time of execution of will. The provisions of the case of Re Stead [1900] 1 Ch 237 discussed rules in relation to communication were there are more than one trustees and full communication in relation to the trust is not made to them all. In case of tenants in common only with whom the process of communication has been completed are bound. In the case of joint tenants where the communication takes place before the execution of the will than all secret trustees are bound and after the will has been executed only with whom the process of communication has been completed are bound. In situation where a fully secret trust has failed to be established the trustee will absolutely take it. However there is a exception to this rule as provided by Re Boyes. According to the rule where the absolute legatee had knowledge that he is a secret trustee but the communication has not been completed the property has to be returned to the estate. Where there is a failure to establish a half secret trust the property has to be returned to the estate via the resulting trust. The half secret trustee cannot take absolutely as he is named as a trustee in the will. The way in which the requirement for acceptance has been applied by the court have been discussed in various cases. These cases include the case of Moss v Cooper where it has been stated by the court that silence will be regarded as a valid form of acceptance.

Types of Trusts

In the given situation it has been provided that David has required Lisa to act as the trustee of his illegitimate Son. In his will it has been provided that Lisa was to be bequeathed with an amount of 5000 for the purpose which is known to her. A letter had been sent by David to Lisa in 1999 which suggested that he has changed his mind and wanted to hold the legacy for a person which is in the envelope and is to be opened only after his death.  A will is considered to be legally binding as per the Wills Act 1837 section 9 where it is formally written having the testators signature and witness. However such rules are not applicable in relation to a secret trust as the name if the beneficiary is not provided for in any formally created will.  In the given situation it can be stated that as the Will had a mention in relation to Lisa being a trustee for a purpose known to her a half secret trust has been created. This is because Lisa has been named as a trustee in the will.  The existence of a half secret trust in this situation can be strengthened by the application of the rules provided in the case of Ottaway v Norman. As per the case the basic requirements for the creation of a secret trust include intention of the testator to put the legatee to trust obligations in favour of the beneficiary, communicating the intention to the legatee and the acceptance of the obligation which has been imposed on the transferee. Here there is intention of David to create the secret trust and the obligation imposed on Lisa has been accepted by her. In the given situation things would have been a bit different. In the case of Re Keen [1937] Ch 236 it had been held by the court that the secret trustee may be provided by the testator by a sealed letter which is to be opened after his death. It will be a good communication if it is stated that the letter contains the term of the trust. As per Re Cooper [1939] Ch any changes to the trust has to be communicated. Thus a secret trust is altered in the name of the person in the envelop which is Stevens mother

Further it has been provided that Mohammed and Adnan have been provided with 10000 as tenants in common by David to hold as trustees in form a secret trust for a person whose identity was to disclosed in the due course. This had been agreed by Mohammed. He had been latter notified Adnan to hold the money for his mistress Anna on trust. Whether a secret trust has been created in this situation depends upon the rules of a valid secret trust as provided through the case of Ottaway v Norman. There must be communication, intention and acceptance. Here there is intention on the part of David to create a trust. Whether there has been proper communication or whether the acceptance has been made in a valid way is the issue. It is clear that Mohammed and Adnan are holding the money as tenants in common. As discussed above in case of a half secret trust communication and acceptance has to be before or at the time of execution of will. In addition In case of tenants in common only with whom the process of communication has been completed are bound. Here the process of communication has been completed with both Mohamed and Adnan as Mohamed had been agreed to the trust and the Adnan has been notified about Anna. Here the acceptance of Adnan has been completed because he had stated silent and as per the case of Moss v Cooper it has been stated by the court that silence will be regarded as a valid form of acceptance. However such communication and acceptance has to be done before the time of the execution of the will which has been done in the case. However Mohamed does not known the person who is the beneficiary after the death of David. As per the Re Boyes when the identity of the beneficiary is not disclosed the legacy will be held for the estate of the testator.  The money will be back to the estate of David. On the other hand in the given situation Adnan who has knowledge about the beneficiary and has signified his acceptance through silence thus the secret trust would be binding on him and he cannot keep the money for his own.

Requirements for Creation of Secret Trusts

In the given situation things would have been no difference. In the case of Re Keen [1937] Ch 236 it had been held by the court that the secret trustee may be provided by the testator by a sealed letter which is to be opened after his death. It will be a good communication if it is stated that the letter contains the term of the trust. As per Re Cooper [1939] Ch any changes to the trust has to be communicated. Thus a secret trust is altered in the name of the person in the envelop which is Stevens mother. The communication has already taken place and there would be no difference in the situation.

A codicil is regarded as a formal amendment to a existing will. The primary rule is therefore an attempt for the purpose of determining the destination of a person’s property taking place after the death of the person will be void if it does not appear to be valid.  In case there have been a formal amendment done by David to the will it is going to have some effect on the will in relation to its usefulness. The difference takes place because the main goal of setting out a codicil is to change and annulment of a will. In the given situation where the Will created by David is amended based on the terms which have been codicil. The court will also consider the codicil as Davids final intention. Where the will had been confirmed in 2001 it would not have had an effect on the name of the beneficiary as to for whom Adnan and Mohameed had be asked to held the money for. Thus the change would not have had any significant difference. Since this is a Half trust the acceptance has to take place before the will is executed. Thus as he acceptance was done there will be no difference.

It has been provide through the case of Re Stead [1900] 1. Ch. 237 where the secret trustees are joint tenants and the communication has been made after the execution of the will only those person to whom such communication has been made are bound. In case the secret trustees are joint tenants and the communication to one secret trustee takes place before the execution of the will all secret trustees will be bound to the situation. Where there is a failure on the part of the testator to establish  a fully secret trust, the secret trustee will be entitled to the legacy absolutely as per Walgrave v Tebbs. Since this is a Half trust the acceptance has to take place before the will is executed. If the will had not been confirmed by codicil than the will is not executed by David. Here Adnan and Muhammad being joint tenants would have a bidding secret trust as the acceptance has been done before the execution. Thus as per the above discussed rules the terms of the secret trust would be binding on them both as they are joint tenants.

It has been provide through the case of Re Stead [1900] 1. Ch. 237 where the secret trustees are joint tenants and the communication has been made after the execution of the will only those person to whom such communication has been made are bound. In case the secret trustees are joint tenants and the communication to one secret trustee takes place before the execution of the will all secret trustees will be bound to the situation. Where there is a failure on the part of the testator to establish  a fully secret trust, the secret trustee will be entitled to the legacy absolutely as per Walgrave v Tebbs. Since this is a Half trust it has different requirements in relation to the formation which is intention communication and acquiescence as per the case of Blackwell v Blackwell [1929] A.C. 318. The acceptance has to take place before the will is executed. If the will had been confirmed by codicil than the will is executed by David. Here Adnan and Muhammad being joint tenants would have a bidding secret trust as the acceptance has been done before the execution. Thus as per the above discussed rules the terms of the secret trust would be binding on them both as they are joint tenants. The situation would not change as acceptance had been made by Adnan in 2000 through silence which is before the will is confirmed by David.

Conclusion 

Thus form the above discussion it can be concluded that there is a presence of a secret trust in the situation of David as all requirements for a secret trust has been met. The basic requirements for the creation of a secret trust include intention of the testator to put the legatee to trust obligations in favour of the beneficiary, communicating the intention to the legatee and the acceptance of the obligation which has been imposed on the transferee. There is certain situation where the testator has to communicate the terms of the fully secret trust or half secret trust to the trustee The trust created here is a half secret trust which have slightly different requirement. The alternative positions do not change the position much except in case of joint tenancy rather than tenants in common.

References 

James Penner, The law of trusts (Oxford University Press 2016).

Panesar, Sukhninder. Equity and Trusts. Pearson Higher Ed, 2017.

Philip H Pettit, Equity and the Law of Trusts (Oxford University Press 2012).

Richard Clements and Ademola Abass, Equity & Trusts: Text, Cases, and Materials (Complete 2015).

Sherwin, Emily L. "Fiduciary Law and Equity: Enforcing Loyalty." (2018).

Blackwell v Blackwell [1929] A.C. 318

Moss v Cooper (1861) 1 J & H 352

Ottoway v Norman [1972] 2 WLR 50 12

Re Boyes (1884) 26 Ch D 531

Re Cooper [1939] Ch

Re Keen [1937] Ch 236

Re Stead [1900] 1 Ch 237

Wallgrave v Tebbs (1855) 2 K & J 313

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