Robert Jacques Lorenz v Shelia Caruana & Ors

At the strike-out or summary-judgment stage, the question is whether a secret-trust claim has a realistic prospect of success, not whether the claimant has already proved the trust. The court must consider the pleaded case and evidence, including evidence reasonably expected at trial, without conducting a mini-trial.

A secret trust requires an intention to impose an enforceable obligation, communication to and acceptance by the legatee, and certainty of language, subject matter and objects. An inheritance-tax motive and an outright gift in the will do not inevitably exclude a secret trust. Changes in intended property or beneficiaries may leave an alternative claim viable if there is a realistic prospect that the final instructions can be established. Appellate intervention in an evaluative judgment requires an identifiable flaw undermining its cogency.

Alan Lorenz died leaving his residuary estate to his civil partner, Sheila Caruana, under his Last Will. Robert Lorenz claimed that Sheila held one half of the estate on secret trust for Robert and his siblings, with an alternative claim for a declaration identifying different subject matter or beneficiaries.

Master Kaye dismissed Sheila’s application to strike out the claim or obtain summary judgment. Joanna Smith J allowed Sheila’s appeal and dismissed the claim. On this second appeal, the issues were whether the Judge applied the correct appellate approach, whether there was a realistic prospect of proving the three certainties of a secret trust, and whether further evidence could emerge at trial.

1. Appeal allowed. The Court of Appeal restored Master Kaye’s decision dismissing the application for strike-out or summary judgment.
2. The question on the second appeal was whether the Judge was correct to conclude that the Master’s decision was plainly wrong. The relevant inquiry was whether the claim had a realistic prospect of success, as explained in Easyair v Opal Telecom [2009] EWHC 339 (Ch). That inquiry was evaluative rather than discretionary. Intervention in an evaluative judgment required an identifiable flaw, such as a gap in logic, inconsistency or failure to consider a material factor, undermining the conclusion, applying Re Sprintroom Ltd [2019] EWCA Civ 932.
3. A secret trust requires an intention to create a trust satisfying certainty of language, subject matter and objects, communication of the trust to the legatee, and acceptance by the legatee. The language must impose an enforceable obligation rather than merely express a wish or moral obligation. The claimant bears the burden of proof.
4. Although the contemporaneous documents strongly supported the view that Alan intended an outright transfer to Sheila for inheritance-tax purposes, other documents referred to instructions and an agreed plan for gifts to family members. Sheila was the only person able to give direct evidence of the relevant conversations. Further disclosure, evidence from the solicitors who made the attendance notes, cross-examination and possible inferences from any failure by Sheila to give evidence could realistically assist the claim. It therefore went beyond a mere hope that something might emerge.
5. An intention to obtain the inheritance-tax benefit of the spousal exemption did not inevitably preclude a secret trust. Kasperbauer v Griffith [2000] W.T.L.R. 333 did not establish a general rule requiring that result.
6. Current uncertainty about the subject matter or objects was not necessarily fatal at this stage. Instructions could be given before, at or after execution of the will, provided that the decision at death to leave property to the legatee was based on the legatee’s promise to carry out the instructions. A change of mind about the property or beneficiaries might defeat the primary relief but could leave the alternative claim viable.
7. It was left undecided whether an arrangement requiring gifts over time, rather than immediate distribution on vesting of the legacy, could satisfy the requirements of a secret trust.

1. Court of Appeal (Civil Division): allowed the appeal and restored Master Kaye’s decision.
2. High Court (Chancery Division): Joanna Smith J allowed Sheila Caruana’s appeal from the Master and dismissed the claim.
3. Master Kaye: dismissed the application to strike out the claim or grant summary judgment.