Silent Acquiescence and Secret Trusts
A recent decision out of the British Columbia Court of Appeal had the opportunity to consider Secret Trusts, which the Court proffered are “rarely encountered today, but have a long history.”
Secret Trusts are trust arrangements made between a testator and a trustee, without disclosure of the terms of the arrangement, but where an understanding exists between the parties. Secret Trusts are not mentioned in a testator’s Will. In addition to the usual trust requirements of certainty of intention, objects and subject matter, to make out a Secret Trust, the following factors must be shown:
- An intent by the testator to subject the trustee to an obligation in favour of a beneficiary,
- Communication of that intent to the trustee,
- Acceptance of the obligation by the trustee, either expressly or implicitly, and
- The conditions are satisfied before or after execution of the will, but before the testator dies.
Of course, Secret Trusts can be found to exist in both testate and intestate estates.
In Bergler v Odenthal, 2020 BCCA 175, the Deceased, on her deathbed, informed her common-law spouse that, should he become involved in a new relationship, her wish was for her Estate to pass to her niece, who had no career or significant savings. The Deceased wanted her Estate assets to be used to assist her niece in returning to school, should her common-law spouse enter into a new relationship.
The Deceased’s nieces and family members testified to having had similar conversations with the Deceased, or, to having overheard such conversations. While much of the nieces’ evidence was hearsay, the trial judge found that necessity and reliability had been established and that it was therefore admissible to prove the Deceased’s wishes.
Shortly after the Deceased’s death, the common-law spouse transferred himself the Estate assets, depleted them, and, entered into a new relationship. Upon entering into the new-relationship, he refused to transfer any assets to the niece.
In rendering its decision, the Court looked to Waters’ Law of Trusts in Canada (4th ed, 2012), explaining that the two essential features of a secret trust are a “communication” by the deceased person, to his or her devisee, legatee, or intestate heir, and an acceptance by that person. In expanding on this definition, the Court quoted Professor Waters,
“The communication is the most essential factor. Once it is established, acceptance, though vital, can be spelled out of the silence of the devisee, legatee, or heir. The court takes the view that any person having received a request of this nature would be bound to say something if he rejected the idea that he himself should not enjoy the property beneficially.”
The silent acceptance of the obligations imposed under a Secret Trust has also been commented on in Oosterhoff on Trusts (9th ed, 2019), where it is observed that “positive acceptance will suffice, but so too will silent acquiescence,” as well as by the editors of Underhill and Hayton: Law Relating to Trusts and Trustees (18th ed., 2010), who state “Acceptance by the recipient [of the communication of the deceased] is readily inferred once communication occurs unless he protests.”
Though the Court provided a thorough review of silent acquiescence, in Bergler, it was found that the common-law spouse had positively accepted the obligation to hold the Deceased’s assets in trust, for her niece, such that silent acquiescence did not need to be relied upon, in any event. The Court found that the trial judge did not err in making this finding.
The Court also determined that, in finding that a Secret Trust had been settled, upon the acceptance by the common-law spouse, jointly held property between him and the Deceased was severed, such that the common-law spouse was holding the Deceased’s interest in the real-property in Trust, for the niece, in accordance with the obligations imposed upon him pursuant to the terms of the Secret Trust.
To learn more about Secret Trusts, please see the below:
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