Canadian appeal court upholds secret trust

Tuesday, 07 July 2020
The Court of Appeal of British Columbia has upheld a so-called “secret trust” that overruled the rules of intestacy under the Wills, Estates and Succession Act (SBC 2009), as well as severing a joint tenancy (Bergler v Odenthal, 2020 BCCA 175).
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Although Angelika Stuhff died without a will in place, on her deathbed she allegedly requested of her common-law partner, Bernd Odenthal, that he would pass her assets on to her niece, Susanne Maria Bergler at a certain time. In other words, Stuhff’s assets would be held in an informal trust for Bergler by Odenthal, rather than passing to Odenthal through the rules of intestacy.

The case came before the Supreme Court of British Columbia when the timing of Bergler’s receipt of her aunt’s assets was contested.

Odenthal asserted that Bergler was to receive Stuhff’s estate on his own death and not before, whereas Bergler maintained that she was supposed to receive the assets at such a time as Odenthal entered into a new relationship, which had taken place. The trial judge found that in accepting Stuhff’s deathbed wishes, Odenthal had entered into a “secret trust” and, moreover, agreed with Bergler on the timing that the transfer of assets should take place.

During the subsequent appeal, Odenthal argued that “his acceptance of a binding and enforceable obligation to carry out the deceased’s wishes could not have been reasonably inferred from the evidence before the Court.”

Madam Justice Newbury, disagreed, saying: “I am not persuaded the trial judge failed to consider the element of acceptance or that she erred in law or in fact in finding that Mr Odenthal had accepted the trust. He was required to transfer the trust assets on death or upon entering into a new relationship, whichever first occurred.”

Also contested was some property held in joint tenancy by Odenthal and Stuhff, which Odenthal said should pass solely to himself by right of survivorship, and not be included in any existing secret trust. The appeal court judges confirmed that the creation of the secret trust severed the joint tenancy, and ruled that the deceased’s interest in the property formed part of the trust and would therefore pass to Bergler.

James Zaitsoff of Owen Bird, who represented the successful party (Bergler), commented on the importance of the case: “If you are a beneficiary (by way of intestacy or under a will) and the testator provides you with instructions regarding the assets that you will receive upon their death, exercise caution. Even silence may constitute acceptance of the trust obligation. The courts take the view that if a testator makes a request of this nature, you should be bound to say something if you intend to reject the instructions and seek to claim the assets as your own after the deceased’s death.”

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