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Estates - Wills - 'Secret Trusts'

. Gefen Estate v. Gefen

In Gefen Estate v. Gefen (Ont CA, 2022) the Court of Appeal considers secret trusts:
[46] A. H. Oosterhoff describes secret trusts in “Secret and Half-secret Trusts,” Ontario Bar Association Continuing Legal Education, Trusts, Trustees, Trusteeships – All You Need to Know and More…, September 18, 2006, at p. 3:
A secret trust comes into existence when a testator leaves property to a person and that person secretly agrees with the testator to hold the property for the benefit of another person. There are two kinds of secret trust. With a fully-secret trust the testator leaves the property to a person apparently absolutely. In other words, the will discloses neither the existence of the trust, nor the name of the beneficiary. With a half-secret trust the will leaves the property to a person in trust, but the will does not disclose the beneficiary. If the requirements for the trust are satisfied, equity will enforce the trust and ensure that the property is given to the intended beneficiary of the trust.
[47] Secret trusts do not comply with the formal requirements of statutes governing wills, but equity intervenes to enforce the trust. Traditionally, this was seen as a means to avoid fraud, as absent intervention by equity, the trustee who received property might keep it, rather than abiding by the terms of the trust.

[48] The trust was secret for a variety of reasons. As explained by A.H. Oosterhoff, Robert Chambers & Mitchell McInnes, Oosterhoff on Trusts: Text, Commentary and Materials, 8th ed., (Toronto: Carswell, 2014), at p. 870:
A testamentary gift that favours one sibling over another, or that reveals the existence of an illegitimate child or secret lover, may generate ill-will or hostility amongst family members and close friends. Better to postpone the storm until after one is gone. Alternatively, a testator may be motivated by a desire for secrecy even after death. Once admitted to probate, a will becomes a public document, available to anyone for a fee. A secret trust allows a testator to conceal the fact that property has been left to, say, a political organization with unpopular views.
[49] In Champoise v. Prost, 2000 BCCA 426, 77 B.C.L.R. (3d) 228, the British Columbia Court of Appeal described the elements of a secret trust at paras. 15-16:
A secret trust arises where a person gives property to another, communicating to that person an intention that the property be dealt with in a specific way upon the happening of an event, and the donee accepts the obligation. The essential elements are the intention of the donor, a communication of the intention to the donee and acceptance of the obligation by the donee: Sutherland Estate v. Nicoll Estate, 1944 CanLII 70 (SCC), [1944] S.C.R. 253 (sub nom. Hayman v. Nicoll), [1944] 3 D.L.R. 552; Jankowski v. Pelek Estate, (1995), 1995 CanLII 11066 (MB CA), 131 D.L.R. (4th) 717 (Man. C.A.); Ottaway v. Norman, [1971] 3 All E.R. 1325 (Ch.D.); D.W.M. Waters, Law of Trusts in Canada, 2d ed. (Toronto: Carswell, 1984) at 215-217.

In addition to these requirements for an enforceable secret trust, the three certainties necessary for any express trust must be exhibited; the words making the trust must be imperative, the subject of the trust must be certain, and the object or person intended to take the benefit of the trust must be certain. Further, those certainties must be exhibited at the time the trust is created: Re Beardmore Trusts, [1951] 1 D.L.R. 41; D.W.M. Waters, Law of Trusts in Canada, supra at 107.
[50] As the trial judge noted, the courts distinguish between an intention to create a legally enforceable trust as opposed to a moral obligation intended to guide the recipient’s conscience: see, e.g., Re Snowden, [1979] Ch. 528. The latter cannot be the basis of a secret trust. Even if the donor’s intentions and wishes are made clear and acknowledged by the recipient, that alone is not enough to establish a secret trust: Milsom v. Holien, 2001 BCSC 868, 40 E.T.R. (2d) 77, at paras. 15, 35-36, and 42-43.



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Last modified: 24-11-22
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