Surprise! A Blog On Secret Trusts

Our office has previously written on the topic of secret trusts, here: https://www.cwilson.com/can-you-keep-a-secret-trust/. This article will discuss some further case law where attempts were made, both successful and unsuccessful, to prove the existence of a secret trust.

A trust is considered "secret" when the donee's obligations are not referenced in the document under which the property is given to the donee (Anderson v Anderson, 2010 BCSC 911, at para 166). The principles of a secret trust are well established and were confirmed in the B.C. Court of Appeal in Champoise v Prost, 2000 BCCA 426:

The donor must have the intention to create a trust; There must be communication from the donor to the trustee regarding the intention to create the trust; There must be acceptance of the obligation by the done; The three certainties necessary for any express trust must be exhibited at the time the trust is created. Since the nature of secret trusts leads to the some or all of the terms being set out verbally, these trusts can be difficult to prove in court.

In Anderson v Anderson, 2010 BCSC 911, an unsuccessful attempt was made to claim the existence of a secret trust. The deceased had transferred his recreational property (the "cabin") to his second wife for $1.00 and natural love and affection. The cabin was used by the second wife and the deceased's children for many years following the deceased's death. The litigation arose when the deceased's second wife advised the deceased's children that she intended to sell the cabin.

The deceased's children's allegations amounted to a claim of secret trust. They claimed that the deceased had always intended that the cabin would remain in the family and that their father's second wife held the cabin on specific trust terms: she would have use of the cabin for her lifetime or as long as she wished and upon her interest being determinable by death or otherwise, the cabin would devolve to the deceased's three living children.

In Anderson, the Honourable Justice Dardi found that there was no direct evidence to support the allegation that when the deceased transferred the cabin to his second wife, that he communicated the trust terms alleged by his children. There was also no evidence of acceptance of such obligations. Further, the three certainties required to prove a trust were not established. The plaintiff children were found to have been fully aware of the gift their father made to his second wife as it...