•    Secret trusts

This is a particular type of trust by will. These are trusts not disclosed on the face of a will, but which in certain circumstances, will be upheld.

Two categories:
1.    Wholly secret trusts: occur where a testator makes an apparently absolute gift; e.g. ‘I give Blackacre to X’. But X will not be able to take the property as his or her own if the testator, prior to his or her death, either before or after making the will, tells X that Blackacre must be held on trust for someone else, or some other object, and X accepts that trust. X will then hold Blackacre as trustee under the terms of the arrangement reached with the testator. If the agreed purpose becomes impossible to perform, or is otherwise illegal, X will not be able to take the property as his or her own. He or she will hold it on trust for the testators next of kin, or other takers on intestacy: Voges v Monaghan

Ottoway v Norman sets out the essential elements for a wholly secret trust as follows:
a.    The intention of the testator to subject the primary donee (the party actually named as recipient in the will) to an obligation in favour of the secondary donee (the party actually intended to benefit);
b.    Communication of that intention to the primary donee; and
c.    Acceptance of that obligation by the primary donee; either expressly or by acquiescence.

2.    Partially secret trust: occurs when the will shows that a trust is intended, but the precise object of the trust is not indicated.
In this case the nominated trustee cannot take beneficially and the property will either be held on trust for the testator’s next of kin or residuary beneficiaries, or for the object of the secret trust, depending on whether the nominated trustee is informed of the secret object before execution of the will or creation of the trust: Re Fleetwood, Sidegraves v Brewer (1880)

A trust created this way will only extend to the property covered by the instructions given to the proposed trustee; it will not cover property left in the same bequest: Re Cooper, Le Neve Foster v National Provincial Bank [1939].

•    Mutual Wills

These involve an agreement, usually between 2 people, to make wills in favour of each other providing reciprocal benefits with some provisions in each case that, should the one predecease the other, the survivor will make provision for some third party or parties mutually agree upon.

It is the essence of the agreement that the survivor is not to revoke the agreed will after the death of the first of the two.

If the survivor revokes the agreed will, he or she will then become constructive trustee upon the terms of that agreed will: Birmingham v Renfew (1937).

6.8 Trusts arising from Agreement or Common Intention

An agreement to create a trust is a contract rather than a trust, and the existence and enforceability of any such trust will be determined by the law of contracts, rather than that of trusts.

If consideration is provided for a promise to create a trust, the court can overlook formal defects that would be fatal to a voluntary declaration.

Despite the limited quantity of evidence available in domestic property disputes, they must still be decided upon established principle, under which the courts declare the rights of the parties, rather than altering them, subject to any statutory power to do otherwise.

The general rule is, where one person purchases property in the name of another, the legal titleholder will be presumed to hold that title upon a resulting trust for the purchaser.  this principle will apply where the purchase moneys are provided by two or more people.

The legal title holder will be presumed to hold that title on trust for those contributing to the purchase price in proportions which reflect their respective contributions to the cost of acquisition: Calverley v Green. This presumption can be rebutted by evidence of a contrary intention on the part of the purchaser, such as an intention to make a gift.

Pettit v Pettit
Facts: A husband claimed a share of proceeds of a sale of a house belonging to his wife, the basis of minor
improvements he had made to the house and garden. The house had been purchased with his wife’s money.
Held: The House of Lords rejected the man’s claim, holding that in the absence of any agreement or common intention, or any question of estoppel, where one party performs work or expends money on the property of another he or she will have no claim to that property. Any such common intention will be an actual intention either expressed by the parties or one which could be inferred from the facts, and not an intention imputed to them on the basis of what reasonable spouses would do in the circumstances.

Lord Denning decreed constructive trusts on the basis of an intention imputed to the parties, or some general test of what was ‘fair’ in the circumstances: Eves v Eves.   

In Cowsher v Cowsher, it was held, to be recognized under these principles, an agreement or common intention had to represent a consensus shared by the parties as to the proportions of the purchase moneys which the parties would be deemed to have provided. (‘the money consensus’).

In Re Densham however, Goff J said, if the parties thought about the matter at all, they would think about ownership and not some artificial monetary value which could be ascribed to their actual contributions (the ‘interest consensus’).

This doctrine was applied in Allen v Snyder [1977].
Facts: Mr Snyder took proceedings seeking to evict Mrs Allen from a house, a legal title to which stood in his name, in which they lived together for under 10 years.
Mrs Allen claimed that the beneficial interest in the house was shared equally between the two.
Held: The court would uphold a trust arising from an agreement or common intention as to the division of the beneficial interest, provided the claimant contributed as contemplated. The agreement or common intention had to be actual – either expressed or capable of being inferred from the facts. Majority found that this intention was not imputed by the parties.
Glass JA also held that the trust enforced in such a case was an express trust arising from an agreement between the parties as to their respective interests, rather than the deemed value of their contributions.

The respective shares of the parties in the beneficial interest of the property reflect the terms of the agreement, and not the level of their respective contributions to the purchase cost.  Those contributions which need not be direct contributions to the purchase price, act as consideration in the agreement and only have to be sufficient, not necessarily adequate.

In coming to the decision in Allen v Snyder, cases where cited which use the language of constructive trusts and it might be better to look at trusts arising in these cases, not as express trusts directly created by the parties, but rather as constructive trusts imposed by the court in the event of the unconscionable conduct of the defendant in failing to abide by the terms of the agreement and give effect to the express trust.  common intention constructive trusts.

In Zaborskis v Zaborskis it was held that there was a common intention to share the beneficial interest in a house equally where the parties had lived together for 36 years, during which time the woman had not made financial contributions but had produced 5 chidren. The only evidence presented of any statement of an intention as to the manner in which their interests were to be shared was a declaration by the man, when they went to one of the properties in which they had lived during the time, that ‘This is your house; this is my house!’.

By contrast in Burns v Burns, the English court of appeal found no common intention in a case where the parties had cohabited for 19 years and had 2 children. The woman made no contribution to the initial purchase price because she was pregnant at the time, but did earn income during the last 5 years of the relationship, and then at a greater rate than the man.

In Delehunt v Carmody, a contest arose between the former de facto spouse and the estranged wife of a man who had died. The man was a registered proprietor of the house in which he and the de facto had been living. The NSW court of appeal found that no enforceable agreement existed because there had been no agreement on the question of survivorship.

The Privy Council has stated that what their Lordships call the ‘common intention constructive trust’ is effectively no more than a particular application of proprietary estoppel principles. This cuts against the view of Glass JA that a trust arising from agreement or common intention is an express trust.
However Browne-Wilkinson VC has said that the two doctrines rest on the same foundation and have reached the same conclusions: Grant v Edwards [1986].