Secret Trusts: Validity and Justifications

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A: Trust is, according to the Black Law Dictionary, a right of real assets which has been held
by one association for the advantage of others.1 In other words, the trust, if one person
appoints someone else as a trustee, to leave his property to him to hold it and gives to a
specific third party, who is, in fact, the real beneficiary.
Owning the property legally until to give to the intended one is called trust. Mainly, there are
three personalities involved in this trust. Namely, settler/testator the person who transfers
his/her property. The second is trustee, who holds the property until give to the intended one
and the third one is beneficiary, who eventually receives the property.
The trust can be a testamentary trust and inter vivos trust. Moreover, inter- vivos trust means,
the gift is made amid existing parties, provides that gift take effect while the donor is still
living. In contrast with the testamentary gift, tends to come into active only on the demise of
the donor.
Inter- vivos trust is ruled under Law of Property Act 19252. Accordingly, section 53(1) states,
the inter vivos trust should be written and signed by the relevant parties when it was made.
On the other hand, to transfer testamentary trust which is a will, the settlor must comply with
section (9) associated with Wills Act 18373. Hence, in order to will to be lawful, it should be
in inscription and sign up by the relevant parties and also eye witness by 2 individuals as per
section (9) associated with Wills Act 1837.
Trust to be valid and acceptable, the certainty of the object must be clearly stated in the will
or trust. If the object is not known, the trust fails and the trustee holds the property on a
resulting trust for the testator if he is alive or for his heirs.4 The trust can be created orally and
in writing.
Once the trust is created, the executor becomes a lawful possessor of the asset and the
ultimate beneficiary became, the justifiable possessor of the asset. Also, if the trust is inter
Vivos, it will be effective once the trust is formed, even the testator is living. But, if it is
testamentary, the trust will become effective only after the demise of the donor.
A secret trust arises, when the testator wants to benefit someone a gift under the will but
wants to keep the identity of him/her in secret for moral obligation such as in the case of an
illegitimate child. For this purpose, he finds a trusted confidant and agrees with him/her to
make him as the absolute owner of the property to hold it and transfer the property to the real
beneficiary. In the manifest, it seems, the trusted confidant who is the trustee is the absolute
owner of the property. But the trustee was communicated that property belongs to the real
beneficiary.5
Secret trust can be fully secret trust and half secret trust. Fully secret trust means, a testator
leaves his property absolutely to a trustee, and the trustee expressly or impliedly agreed in the
lifetime of the testator, to hold the property on trust for a designated beneficiary. The face of
will reads, the trustee is an absolute owner, but the intention is to give to the third party. The
1 Black Henry Campbell, Black's Law Dictionary (5th edn, St Paul Minn West Publishing Co 1979) 1352.
2 Law of Property Act 1925.
3 Wills Act 1837.
4 Panesar Sukhninder, Equity and Trusts (3rd edn, Pearson 2017) 103.
5 Hudson Alastair, Equity and Trusts (4th edn, Cavendish Publishing Limited 205) 223.
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half secret is, in contrast, means, it was mentioned in the trustee that the property goes to
some else but his name is not mentioned in the will.6
In fully secret trust, the trustee is the legatee or the absolute owner of the property. But, the
equity owner is someone else. In half secret, the trustee will not be considered as an absolute
owner. Because only the identity of the equity owner is not mentioned in the will. But the
trustee knows him personally.
The fully- secret trust and half- secret trust contradict with section (9) associated with Wills
Act 1837 in two ways. First, in the face of the will, it seems the trustee is an absolute owner.
But in reality, it is not the case.7 Second, in half secret trust, even the legatee is not the
absolute owner, the beneficiary’s name is not known, which normally invalidate the will.8
The formal rule, in trust law, if there is any uncertainty of object, the trust is void9 and the
real asset should be again transferred to the donor. If the testator died, the property should go
to his or her heirs. In fully- secret trust, conferring to the will, the trustee is a complete owner
of the real asset. Once the donor died, there seems to be significant probability that the
representative may own the asset illegally. This is what section (9) associated with Wills Act
1837. It is unjust for the trustee to own the property who is, in fact, just a trustee.
The question is, why the secret trust was permitted in the courts, even it is in contradiction
with the Wills Act 1837. Secret trust was enforced in courts to give the property to the
intended beneficiary, who is in fact equity owner, even though it is in total contradiction with
said Act. There are two theoretical justifications, why the Wills Act 1837 was not practiced in
secret trust. First, Fraud justification and the second is dehor justification.10
For instance, If John creates a will leaving his entire property to his only one brother Mark
absolutely with the understanding of that Mark, that he will leave his entire property to his
illegitimate son. This means that according to the Wills Act 1837, Mark is an absolute or
legal owner. But, John intends to leave the property to his illegitimate son. His intention was
communicated by John to Mark when the will was created. After the demise of John, Mark
will become the absolute owner of the property left by John as per the Wills Act 1837. But,
Mark knows that the property left by John belongs to his illegitimate son.
According to the requirements related with Wills Act 1837, Mark has argued that, the asset is
in his name and he is the absolute owner. It would be a fraud for Mark to use the provisions
of the Wills Act 1837 to claim that John's property belongs to him. But he has agreed to hold
the property on trust until he leaves it to John’s illegitimate son. Mark cannot claim a fact
which is, in fact, a fraudulent act by using any statutory provisions.
The courts forbade in many cases, this kind of fraud and validated the secret trusts is
grounded on the saying “parity does not allow a law to be the tool of scam.” Case of
Rochefoucauld v Boustead11 illustrate this maxim very clearly. In this case, the land was
transmitted to offender on the thoughtfulness that, it would act as trustee for the claimant, but
6 Panesar Sukhninder, Equity and Trusts (3rd edn, Pearson 2017) 202.
7 Panesar Sukhninder, Equity and Trusts (3rd edn, Pearson 2017) 202.
8 Knight v Knight [1840] 49 ER 58.
9 IRC v Broadway Cottages [1955] Ch 20.
10 Panesar Sukhninder, Equity and Trusts (3rd edn, Pearson 2017) 205.
11 Rochefoucauld v Boustead [1897] 1 Ch 196.
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this was not written in the will. The defendant mortgaged the property claiming he is the
complete proprietor of the asset associated with Wills Act 1837 since it was not written. It
was held in this case that, parity does not allow a law to be used as tool of scam. Denying the
existence of a trust is equivalent to a fraud.12
In another similar case of McCormick v Grogan13. It was held, even, there is no express
evidence that the testator left the property to the defendant on the objective of to give to the
real beneficiary, but the testator’s intention was not to give to the defendant but to the real
beneficiary. Associated with this specific circumstance, the secret trust is valid. This is
because the equity is, the Wills Act 1837 cannot be used for fraudulent acts. 14
Also, “Parity intending to rather than the procedure” is a well-known another equity maxim.
The intention of the Wills Act, 1837 is not to justify any frauds. It does not mean that the
court of equity has ignored the words used in any statutory provisions. Rather, it encourages
the courts to look at what the intention was when the act was drafted. Surely, the intention
was not to justify any fraudulent act when the said act was drafted.15
From both cases and the said maxims, it is clear, that the statutory provisions cannot be used
as a tool for a deception act. The court has theoretically justified that secret trust can be
enforced, even it is in contradiction with the Wills Act 1837. The purpose is just to prevent
any fraudulent acts.
Though the secret trust was justified for the only reason that is to prevent frauds, it became
clear that the fraud alone not be only the reason to justify to enforce the secret trust. Because,
in half- secret trust, there is no contradiction with the Wills Act 1837. But only the issue is
the beneficiary’s identity is not known to the trustee.16
Also, it was argued that fraud justification is not convincing. Because “the said fraud can also
be equally prevented through resultant trust for the donor’s domain.”17 In other words, the
trustee will be considered only as a legal owner and holds the property for the heirs of the
testator.
The second justification is dehor theory. However, “Dehor” is stated as to function external
of something18. It means, the contract of secret trust is not shaped by the Wills Act 1837 but
outside of the Will Act 1837 and considered as an independent contract.19 The contradiction
will arise only if we treated the secret trusts under the Wills Act 1837. Moreover, this theory
was firstly articulated in the scenario of Blackwell v Blackwell20. L. Warrington said in this
case, “what has been obligated is not considered to be trust which has been imposed by will.
But it has aroused from acceptance by the successor of a trust transferred to him by the
donor.”21
12 Rochefoucauld v Boustead [1897] 1 Ch 196.
13 McCormick v Grogan [1869] LR 4 HL 82.
14 McCormick v Grogan [1869] LR 4 HL 82.
15 Keane Ronan, Equity and the Law of Trusts in the Republic of Ireland (2nd edn, Bloomsbury Professional
2011) 49.
16 Panesar Sukhninder, Equity and Trusts (3rd edn, Pearson 2017) 205.
17 Cavendish Routledge, Trusts Law (5th edn, Cavendish Publishing 2006) 40.
18 Black Henry Campbell, Black's Law Dictionary (5th edn, St Paul Minn West Publishing Co 1979) 395.
19 Iwobi Andrew, Essential Trusts Law (3rd edn, Cavendish Publishing Limited 2001) 37.
20 Blackwell v Blackwell [1929] AC 318.
21 Blackwell v Blackwell [1929] AC 318.
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