What happens when a secret trust fails in English law? Secret Trusts are a conundrum. That is why they feature iso prominently in LLB Trust examinations. Let's take an example. Adam [a Testator age 80] contacts his friend Bruce to ask him... more
What happens when a secret trust fails in English law? Secret Trusts are a conundrum. That is why they feature iso prominently in LLB Trust examinations. Let's take an example. Adam [a Testator age 80] contacts his friend Bruce to ask him a favour. He asks Bruce if he can be a legatee for him for a property he wishes to hold and distribute for Claire, his long-time secret lover with whom he has a child Debbie. He does not want Eve his wife to know that this property is to be held for Claire. So he swears Bruce to secrecy. He intends Bruce to hold this property cottage on the Gower Peninsula for Claire, who in turn is instructed to hold on a life interest, with residual for her daughter Debbie. Adam then dies and in his will he leaves £400,000 in cash for his wife Claire, and a cottage on the Gower Peninsula worth £180,000 to his friend Bruce. So we can see a few problems from the start. The first is has Bruce told Claire that he is legatee for her life-tenancy in the Gower Cottage and that she is told hold the residual estate for her daughter Debbie? If she is unaware of Adam's intention for her to benefit from a life interest in the cottage and residual for Debbie, , then how evidentially can this property be held for Claire? It is somewhat of a waste of time and a good lawyer would not propose such a trust solution. Furthermore, as we know from §53(1)b LPA 1925, all transfers of real property must be "evidenced" in writing. Was there any writing? But the big issue is whether this is an express trust that can be recognized consistent with §9 of the Wills Act 1837 which require compliance with formalities, absent in this case, [2 witnesses who are not beneficiaries to attest to Adam's signature on the Will]. Equity cannot allow statute to be used as an instrument of fraud. The fraud here would be that if no-one knows that Bruce holds for Claire, then Bruce can just ignore the oral trust. He can justify this by stating that §9 of the Wills Act requires a signed and witnessed will for the legacy to be valid. WHAT ARE THE STEPS FOR RECOGNIZING A SECRET TRUST.