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The Law of Probate

Describe about the Trust and Equity Law of Instruments of Fraud.

In the given situation Sanjeev prior to his death had made a valid will and bequeathed upon his daughter Ishani the farm on the Isle of Wright together with all its contents and to Amal his cousin all of 30,000 shares in Harcombe Plc. Darshan and Jamil, on the other hand, claim that prior to his death Sanjeev had promised Darshan the farm on the Isle of Wright by way of writing and to Jamil the 30,000 shares in Harcombe Plc. As per Amal, however, the share transfer forms had already been completed by Sanjeev in his favor, and was awaiting only the confirmation the Board of Directors of the Company.

The Law of Probate states that a testator who wants to leave behind his property in a trust must mention the same as his intention in the will. However, there may be a secret trust in the event that the testator is not willing to name the beneficiary in whose favour he wants to leave behind the property publicly. In this situation on the will he makes the gift of the property to the beneficiaries named therein however mentions it to them then they shall be holding the property in favour of beneficiaries who are unnamed. There have been doctrinal difficulties with the secret trust recognition as there is contravention that is apparent with the Wills Act 1837, Section 9. It is required under this Section that all testamentary dispositions are to be signed by the testator and should be in writing along with the witness. Thus in the given case of Sanjeev's testimony, it is possible that there is a secret trust that has been formed by Sanjeev in the favour of Darshan and Jameel. This secret trust is primarily of two types (a) a fully secret trust the fully seceret trust's validity had been accepted and established in the case of McCormick vs. Gorgan[1] by the House of Lords and (b) a half secret trust is a trust where the existence of the same appears in the will. However, there are no formal terms that appear in it.

In the given situation of Darsh and Jameel, it could be a fully secret however there are certain criterions that need to be complied with for it to be a secret trust, in the given case for the trust to exist all the criterions have not been satisfied. In a trust that is fully secret trust the will of trust and its terms are not mentioned in the will. The oral evidence of trustee and testator is sufficient generally in these kinds of trust. However, there should be an intention on the part of the testator for the creation of such trust. 

Secret Trusts

However, it must be noted that in the case of such trust it is necessary that there should be communication of the intention to the trustee, and either impliedly or expressly there must be acceptance by the trustee of the same.  There must have been an intention on the part of the testator to create a trust in this form, and there must have been communication of the trust and its terms to the trustee who has been proposed prior to the will's execution, these terms also should have been accepted by the trustee. 

It was held in the case of Blackwell vs. Blackwell[2] that there are three necessary elements to this secret trust (a) intention, (b) communication and (c) acquiescence. The intention of the testator is that the entire gift should be utilized in a manner of his will and not the desires of the done, this intention is told to the donee and either by way of tacit or express promise which is indicated through acquiescence, there is encouragement by the proposed done for bequeathing of money in the faith that there is a carrying out of the intention. However due to there being a lack of evidence with respect to the terms and existence there is a slight awkwardness in fully secret trust.[3] The test for proving whether a fully secret trust was in existence was set out in the case of Ottaway vs. Norman[4]. This test it that the person to whom there is an imposition of the trust is the ‘primary donee' and under the trust the beneficiary will be the ‘secondary donee'. Elements that are essential to be proved are (i) there must have been an intention on the part of the testator for subjecting the primary donee with the obligation which is in the secondary donee's favour; (ii) the intention should be communicated to the primary donee; and (iii) the obligation must be accepted by the primary donee wither by acquiescence. It however not material whether the elements succeed or precede the donor's will.

Therefore for a fully secret trust to valid, it is to be proved that an intention was there to create the trust which was communicated to the trustee, and these obligations had been accepted by the trustee. Intention as one of the requirements applies to the fully secret trusts in the same manner as it applies to other trusts.[5]

Fully Secret Trusts

The second requirement is that of communication to the trustee of both the terms as well as the secret trust to the trustee this may be done after the will has been written however it must be prior to the death of the person[6] if there is no communication then the trust would be void. Kay J. in the case of Re Boyes[7] opined that communication means that there should be a chance given to the trustee for refusing the office, and as such, after death, the same cannot be done.[8] Lastly, it is necessary that the trustee accepts his office. In the case Wallgrave vs. Tebbs[9] the two manners in which this could be done was set out by Wood VC when he stated[10] that where a person knows that disposition is being made by testator in his favour the intention of the same is application for purposes that are for benefits other than his, either promises expressly, or by implied silence that the intention of the testator shall be carried out in this effect it is upon the faith of that understanding or promise that the property is left to him[11]. Therefore the communication of the acceptance can be in two ways either by direct stating of the trustee of his acceptance or by not denying implying the same.[12]

In the case of Darshan and Jameel, the claim of a secret trust would be difficult to establish as their needs to be compliance with the three requirements as set down in the cases of Ottaway and Blackwell. However it seems from the facts of the case mentioned that there was no intimation that was given and in a fully secret trust where in there are no words that impose the trust in the case that there is no communication to the legatee during the lifetime of the testator then the will shall taken effect as being to the legate a beneficial gift.[13] Also it seems that there was no opportunity that was given to the beneficiaries under the Ishani and Amal and as given in the case of Re Boyes wherein it was opined that two documents that were unattested would not be sufficient for constitution communication of the trust's terms as there was no opportunity that was given to the trustee for refusing the same. Similarly in Darshan and Jameel's case though there is a written letter and a blank share transfer form which as claimed by them had been handed over to them by Sanjeev however these are unattested  documents and there is no proof that similar intimation had been given to Ishani and Amal as well.

Necessary Elements for Fully Secret Trusts

 Thus, it can be stated that in the case of Jameel and Darshan the only requirement that is being fulfilled is that of intention of the testator. However from the facts, it seems that the same has not been communicated, and neither has there been acceptance of this trust. The intention has however been established with certainty as he has given in writing to Darsh the farm at the Isle of Wright and to however what is not clearly indicated that Sanjeev wanted to appoint Ishani and Amal as primary donee to hold as the trust for Jameel and Darshan. In the case Re Snowden[14] it was held that communication must be of both the terms of the trust and the facts of the trust, communicating the trust’s extent and this communication is required to be made before the testator’s death.[15] It is required for the trustee intended to accept to hold the property as trust. In Jameel and Darshan’s case from the fact it seems that both Ishani and Amal had not been made aware of the fact that the property was to be  held in trust and that there was intention on the part of Sanjeev to have it transferred to Jameel and Darshan, due to lack of evidence regarding the same it would be difficult to establish that a secret trust existed in favour of Jameel and Darshan.

There are however two theories that can be used to justify the situation for Jameel and Darshan. The first theory is the fraud theory. This theory is based on the fact that the statute shall not be permitted by equity to be used as an instrument of fraud. The denial of trust is prevented under the operation of fraud theory based on statutory formalities that are unsatisfactory. It was in the case of Rouchefoucauld v. Boustead[16] that this theory gained support. The other theory is that of Dehors the Will Theory which it is argued that the operation of the secret trust is outside the will. However, both these theories are very unreliable with respect to the acceptance of evidence and cannot be relied on in this case as there is no evidence of the fact that there was communication with the donee under the will Ishani and Amal that such trust would exist.

In conclusion, it can be stated that there was no secret trust between the parties as, if there is a secret trust, it is necessary that there should be some kind of evidence for making it enforceable. This can be a written or oral evidence but as in an express trust must clearly indicate that there is an intention for the creation of the trust.[17] Just mere hope or words that are precatory are not sufficient.[18] In the case of Jameel and Amal, it can be said that there was a mere hope that a secret trust would exist but not enough evidence to prove the same. Further as discussed communication is an essential party the trustee must be made aware of the trust otherwise the conscience of the trustee would not be bound. Agreement to such terms is also necessary. As in the case of  Wallgrave v Tebbs[19] where no communication was made to Mr. Martin and Mr. Tebbs that they would be holding the property as trustee, and it was only after the death of the testator that this fact emerged it was opined that they would be holding the property absolutely. Thus where there no establishment of a secret trust the beneficiary under the will shall hold outright, however, if the terms of the trust are not known but the fact that the secret trust exists is known then the would-be trustee will embrace on consequential trust for the estate of the testator.[20] It is advisable that Jameel and Darshan bring in evidence indicating that both Ishani and Amal were communicated of transfer of property and that they had accepted that they would only been the beneficiaries under the will and acting as a trustee for Darshan and Amal, without such proof there would be no claim that Darshan and Amal can have over the property bequeathed to Ishani and Amal under the will.

References

Critchley P, 'Instruments Of Fraud, Testamentary Dispositions And The Doctrine Of Secret Trusts' [2000] Law Quarterly Review

Goldsworth J, 'Case Note: Half Secret Trusts: The Beginning Of A Change?' (1999) 5 Trusts & Trustees

Haley M and McMurtry L, Equity & Trusts (Sweet & Maxwell 2006)

Hudson A, Equity And Trusts (Routledge-Cavendish 2007)

Mee J, 'Half-Secret Trusts In England And Ireland' [2009] Conveyancer and Property Lawyer

Pettit P, Equity And The Law Of Trusts (11th edn, Butterworths 2009)

Blackwell vs Blackwell [1929] AC 218

McCormick vs Gorgan [1869] LR 4 HL 82

Iain McDonald and Anne Street, Equity & Trusts (Oxford University Press 2009).

Ottaway vs Norman [1972] 2 WLR 50

E Penner, The Law Of Trusts (Oxford University Press 2006).

Re Boyes [1884] 26 Ch D 531

Re Snowden [1979] 2 All ER 172)

Rouchefoucauld v Boustead [1897] 1 Ch 196

Wallgrave v Tebbs [1855] 2 K & J 313

Wilkie M, Malcolm R and Luxton P, Equity & Trusts (Oxford University Press 2004)

[1] McCormick vs Gorgan [1869] LR 4 HL 82.

[2] Blackwell vs Blackwell [1929] AC 218.

[3] Margaret Wilkie, Rosalind Malcolm and Peter Luxton, Equity & Trusts (Oxford University Press 2004).

[4] Ottaway vs Norman [1972] 2 WLR 50.

[5] Alastair Hudson, Equity And Trusts (Routledge-Cavendish 2007).

[6] John Mee, 'Half-Secret Trusts In England And Ireland' [2009] Conveyancer and Property Lawyer.

[7] Re Boyes [1884] 26 Ch D 531.

[8] Supra 4

[9] Wallgrave vs Tebbs [1855] 25 LJ Ch 241.

[10] Ibid

[11] Supra 4 at 278

[12] Supra 4 at 279

[13] Michael A Haley and Lara McMurtry, Equity & Trusts (Sweet & Maxwell 2006).

[14] Re Snowden [1979] 2 All ER 172).

[15] McDonald I and Street A, Equity & Trusts (Oxford University Press 2009)

[16] Rouchefoucauld v Boustead [1897] 1 Ch 196.

[17] Philip Henry Pettit, Equity And The Law Of Trusts (11th edn, Butterworths 2009).

[18] Supra 12

[19] Wallgrave v Tebbs [1855] 2 K & J 313.

[20] P. Critchley, 'Instruments Of Fraud, Testamentary Dispositions And The Doctrine Of Secret Trusts' [2000] Law Quarterly Review.

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