RES exam question on Contract & Agency Law: Mr Yap's will leaves his terrace house to his friend Ben "absolutely"
Mr Yap's will leaves his terrace house to his friend Ben "absolutely". Some years earlier, Mr Yap told Ben, who agreed, that Ben would hold the house for Mr Yap's child from an earlier relationship. The will says nothing more about it. (i) This is a fully secret trust, because the will shows an outright gift to Ben. (ii) Since the trust is not written into the will, Ben may keep the house for himself. (iii) Had Ben first learned of the arrangement only after Mr Yap's death, he would take the house beneficially. (iv) Had the will said "to Ben on trust for purposes I have told him", the trust would be half-secret. Which of the following statements are correct?
- A(iii) and (iv) only
- B(i), (ii) and (iii) only
- C(i) and (iv) only
- D(i), (iii) and (iv) only
Show answer & explanation
Answer
D. (i), (iii) and (iv) only
Explanation
Answer: (i), (iii) and (iv) only. A trust communicated and accepted in the testator's lifetime binds the legatee, even where the will shows an outright gift.(i) True. The will says 'absolutely' on its face, and the trust was communicated to and accepted by Ben in Mr Yap's lifetime.(iii) True. If Ben learns of the trust only after the death, there was nothing he accepted, so he takes beneficially.(iv) True. The trust would then appear on the face of the will without its purposes being named, which makes it half-secret.Rule: A fully secret trust arises where the will makes what looks like an outright gift, but the testator communicated the trust to the legatee in his lifetime and the legatee accepted it, expressly or by acquiescence. A half-secret trust is one where the will says the gift is on trust but does not name the purposes.
Why the other options are wrong
- (ii) False. The trust is outside the will, but the whole point of the doctrine is that it binds anyway. Ben cannot rely on the will's wording to keep the house.
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