It appears, on the face of the will, that Brad is the absolute beneficiary of the painting. However, in my view, this arrangement could give rise to a fully-secret trust. A valid fully-secret trust requires a communication of the intention to subject the secret trustee to hold the property on trust for the secret beneficiary and acceptance on the part of the secret trustee (see, Ottaway v Norman [1972] Ch 698). The communication of both the trust and terms of the trust to the secret-trustee is required in order to be effective communication to create a fully-secret trust (Re Boyes (1884) 26 Ch D 531). Moreover, the communication must take place during the testator’s lifetime (Wallgrave v Tebbs (1855) 2 K & J 313). The conversation between Madge and Brad clearly indicates that Madge intended to subject Brad to a mandatory obligation to hold the property for the benefit of George. The requirement of acceptance can be inferred from the silence or acquiescence of the trustee during the testator’s lifetime and Brad’s silence will be treated as an acceptance of the trust (see, Moss v Cooper (1861) 1 John & H 352). Accordingly, I would advise that a valid fully-secret trust has been created in favour of George. The validity of a secret trust is not questionable despite the lack of formalities laid down in s.9 of the Wills Act 1837. The rationale for enforcing a secret trust is that the communication of the trust and its terms by the testator to the trustee amounts to an inter vivos declaration of trust which is constituted on the testator’s death when the title to the trust property passes to the secret trustee (Blackwell v Blackwell [1929] AC 318); therefore, the Wills Act 1837 is inapplicable in this regard.
(b) Brad’s claim of the Silver Fox
As far as Brad’s claim is concerned, a secret trustee can disclaim a trust if it is communicated to the settlor before the execution of the will (Re Maddock [1902] 2 Ch 220). However, It appears that a secret trust will be valid if the secret trustee disclaims the trust after the death of the settlor and the trust will not fail for want of trustee (Blackwell v Blackwell, supra). Furthermore, if the trustee denies the existence of the trust then he will be using the Wills Act as an instrument of fraud and the court is likely prevent such a fraud (Rochefoucauld v Boustead [1897] 1 Ch 196). Accordingly, Brad’s claim of Silver Fox will be unsuccessful even if he disclaims the trust and the trust in favour of George will not fail for want of a trustee. It is important for my instructing solicitor to adduce sufficient evidence to prove the existence of a secret trust since it arises wholly outside the will of the testator. The standard of proof required to establish a secret trust is simply the ‘ordinary standard of evidence required to establish a trust’ (see, Re Snowden [1979] 2 All ER).
(c) The Validity of Trust of the £50,000 in favour of Brad
It is apparent on the will that Jethro has received the £50,000 in his capacity as trustee. This will have the effect of creating a half-secret trust. The requirements for a creation of a half-secret trust are similar to those of a fully-secret trust with slight differences on the requirements of communication and acceptance (Blackwell v Blackwell, supra). For a half-secret trust, the communication and the acceptance of the trust must take place before the execution of the testator’s will (see, Re Keen [1937] Ch 236; Re Bateman’s Will Trust [1970] 3 All ER). Madge’s conversation with Jethro took place subsequent to the execution of her will. I am, accordingly of the opinion that the half-secret trust in favour of Brad will fail for lack of communication. Jethro, however, will hold the £50,000 on resulting trust for Brad as he is the residuary legatee under the will.
(3) Brad’s Claim of £500,000
Madge had intended to create a trust of her future royalties which cannot form a subject matter of the trust (Re Trytel [1952] 2 TLR 32). However, if the trust was made by a deed it will be treated as a mere promise to create a trust (Re Ellenborough[1903] 1 Ch 697). It is well established that equity will not enforce an incompletely constituted trust which refers to the maxim that ‘equity will not perfect an imperfect gift’ (see, the explanation by Page-Wood V-C in Donaldson v Donaldson (1854) Kay 711). Brad had not provided any valuable consideration (i.e. money or money’s worth) in return for Madge’s promise and as a general rule if the trust is incompletely constituted, the volunteer beneficiary gets no assistance from equity; therefore, cannot seek specific performance (see, Jefferys v Jefferys (1841) Cr & Ph 138; Dening v Ware (1856) 22 Beav 184). There is, accordingly, little likelihood that Brad will able to enforce the trust as he did not provide any valuable consideration.
Although Brad will be unable to compel the constitution of trust as a volunteer in equity, he will be entitled to bring an action at law for damages for breach of a covenant to create a trust. This is possible since a promise to create a trust contained in a deed or accompanied by nominal consideration is enforceable at law. My instructing solicitor did not provide me the information whether Madge had made the promise to Brad or a third-party trustee. Thus, if a settlor had entered into a covenant to create a trust with a beneficiary, then the beneficiary as a party to the covenant will be able to obtain substantial damages for breach of the covenant (see, Cannon v Hartley [1949] Ch 213). Accordingly, Brad will be entitled to recover damages if he was a party to Madge’s covenant. On the other hand, Brad will not be able sue if a third-party trustee was party to the Madge’s covenant and Brad himself was not. Moreover, the court will not direct the trustee to enforce the covenant (see, Re Pryce [1917] 1 Ch 234). However, It may be objected that the trustee holds the ‘benefit of the covenant’ on trust for Brad. On this analysis, the ‘benefit of the covenant’ as a ‘chose in action’ was capable of being the subject matter of the trust (see, Williamson v Codrington (1750) 1 Ves Sen 511) and was correctly transferred to the trustee at the time of the execution of the covenant. Such a trust is completely constituted and enables the beneficiary in his own right to enforce the settlor’s covenant with the trustee (see, Fletcher v Fletcher (1844) 4 Hare 67). Therefore, I am of the opinion that Brad will able to sue for damages in his own right if it can be shown that he is the beneficiary of a completely constituted trust of the benefit of the covenant. However, Brad is entitled to the whole royalties as a residuary legatee under the will if he fails to claim damages.
(4) Conclusions
- The trust of Madge Mansions in favour of Gwynneth is valid and Gwynneth is immediately entitled to the equitable interest in Madge Mansions.
- The trust of Silver Fox in favour of George will be valid if there is sufficient evidence to prove the existence of the secret trust and s.9 of the Wills Act 1837 is inapplicable since it arises outside of the will.
- Brad’s claim of Silver Fox will fail as his silence will be treated as an acceptance of the trust and the trust will be valid even if he denies the trust after the death of Madge.
- The trust of £50,000 in favour of Brad will fail for lack of communication prior to the execution of the will. Nevertheless, Jethro will hold the £50,000 on resulting trust for Brad as he is the residuary legatee under the will.
- The trust of the half royalties which amount to £500,000 in favour of Brad will fail. However, Brad will be able to claim substantial damages under common law if he was a party to Madge’s covenant. On the other hand, if he was not a party to the covenant then he is entitled to damages only if the trustee holds the benefit of the covenant on trust for him. Even if Brad is unsuccessful in claiming damages at common law he is entitled to the whole royalties as he is the residuary legatee.
Words: 1619
Bibliography:
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Robert Pearce & John Stevens, The Law of trusts and Equitable Obligations (4th ed. 2006, Butterworths)
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Hanbury & Martin, Modern Equity (17th ed. 2005, Sweet & Maxwell)
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Philip H. Pettit, Equity and the Law of Trusts (10th ed. 2005, OUP)
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Paul Todd & Sarah Wilson, Textbook on Trusts (6th ed. 2003, OUP)
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Gary Watt, Equity and Trust Law Directions (1st ed. 2008, OUP)
- Mark Pawlowski, ‘Intention and obligation in secret trusts - some practical implications’ T. & T. 2001/02, 8(2), 7-11
- Margaret Halliwell, ‘Perfecting imperfect gifts and trusts: have we reached the end of the Chancellor's foot?’ Conv. 2003, May/Jun, 192-202
- Mark Pawlowski, ‘Declaration of Trust and Unmarried Couples’ [1999] Fam Law 721
- Rowena Meager, ‘Secret trusts- Do they have a future’ Conv. 2003, May/Jun, 203-214
