The Secret Life of Secret Trusts

“upon the whole matter, it appearing to be, as well a fraud, as also a trust…” Thynn v Thynn (1684)

“every will shall be in writing, and signed by the testator in the presence of two witnesses at one time” IX Will Act 1837

If we consider secret trusts to be “testamentary trusts that arise without complying with the formalities required by the Wills Act 1837” (in particular see sections 1, 9 and 20 (as regards codicils)) and though taxonomically not complicated, with a simple ‘fully’ secret (no mention of trust at all on the ‘face’ of the will) ‘half-secret’ (will mentions trust but does not establish objects) distinction, and consequently different curial solutions in the face of ‘failure’ (in the case of a FST the legatee takes outright; whilst for an HST the trust will fail for want of objects, generating a ‘resulting trust’ (ART) in favour of the testator’s estate) they nonetheless share two, to a degree overlapping conundrums:

i. what kind of trust/s do they represent?
ii. how might we justify the recognition and/or indeed the enforcement of such trusts in the light of their utter failure to comply with, it has to be said, pretty non-ambiguous and long established statutory guidelines.

I here propose to try and address firstly:

Is a secret trust an express trust or a constructive trust? Why?

before moving on to attempt to unravel the related conundrum:

In Blackwell v Blackwell [1929] UKHL 1, [1929] AC 318, Viscount Sumner said that secret trusts are enforceable even if the secret trustees “are acting with perfect honesty, seek no advantage to themselves, and only desire, if the Court will permit them, to do what in other circumstances the Court would have fastened it on their conscience to perform.”

In that situation, how does a court justify enforcing a trust that fails to comply with the Wills Act 1837?

A. Is a secret trust an express trust or a constructive trust?

Capable of several incarnations (inter vivos/testamentary revocable/irrevocable fixed/ discretionary etc.) the ‘express’ triangulated (settlor/trustee/beneficiary) trust might perhaps be considered the ‘classic’ trust, a “trust imposed by the will” as Lord Warrington described it in Blackwell v Blackwell [1929] whilst the ‘constructive’ trust is imposed by the court when a “wrongdoer acquires legal title to property that rightfully belongs to another [importing a] duty to return the property to the true owner”.

Much as in Rochefoucauld v Boustead [1894]7 the tension is between on the one hand an ‘express’ trust, and on the other a ‘constructive’ trust (arising by the ‘operation of law’). This has both theoretic ‘taxonomic’ implications if you will, but perhaps more importantly practical consequences particularly when we come to consider vesting interests in land.

Certainly at first blush both kinds of secret trust have certain significant differences from the classic ‘express’ trust, most notably that ‘timely communication to’ and ‘acceptance by’ the secret trustee are enforceable curial requirements, this not being the case with the ‘express’ trust which can be created even though the intended trustee is wholly unaware of its existence; but is there enough similarity (and the shared remit of fraud prevention) that we can consider them to fall under the Rochefoucauld/‘express’ rubric?

Alternatively can their nature be best captured by a ‘constructive’/‘detrimental reliance’ model; certainly it would ease away the ‘timely communication’/‘acceptance’ issue/s. It would also ease the vesting of land by secret trust, that otherwise may well encounter (aside from s. 9 Wills Act 1837) issue with s.53 (1) (b) of the Law of Property Act 1925 which requires:

“a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will”

If deemed constructive they would be saved by s. 53 (2) which provides exemption for constructive, implied and resulting trusts; it might however be argued that constructive/ express differences aside the reasons for ignoring the Wills Act 1837 should also apply to s. 53(1)(b).

A quick glance at the the table below will confirm that there is little juristic agreement as to how this circle should be squared:

Rochefoucauld [1894] secret trusts
Robert Chambers express (E) constructive (C)
Lord Millett C C
William Swadling E E

Chambers favours the ‘constructive’ trust solution, seeing s. 9 Wills Act as essentially ‘substantive’ (concerned with ‘validity’) suggesting that the testator’s ‘intention’ (to create a trust) PLUS the emphasis on the trustee’s ‘undertaking’ (itself generating ‘detrimental reliance’ as regards the testator) work together in Elias’s terms, to ‘perfect’ the trust. BUT say Swadling, if they are constructive trusts, why as and when they are declared formally ‘void’ is an ART (the usual outcome) not generated; instead the court appears to be looking to ways to give direct effect to what appears to be an ‘express’ trust. He suggests that despite its language, which indeed is (at least in large part) substantive (as was that of its predecessor Section 7 Statute of Frauds 1677) the courts are interpreting s. 9 as if it were procedural, that is to say ‘evidential’ (see: Blackwell v Blackwell [1929]) using the trustee’s ‘undertaking’ to leverage the Rochefoucauld/‘fraud theory’ paradigm, and so bypass the formality requirements of both s. 9 ( and if it is relevant) s. 53 (1) (b).

In a word the will is ‘proved’ (Court of Probate).

So to conclude this section if the trust is constructive, arising by operation of law rather than directly by intention, the formalities problem is obviated, but we then need a ‘reason’ for perfecting the unperfected intentions of the testator which takes us to:

B. How does a court justify enforcing a trust that fails to comply with the Wills Act 1837?

Well, in this contentious area of law, it is perhaps not that surprising, that a variety of explanatory/justificatory paradigms co-exist, all attempting to overcome the flouting of s.9 formalities, and accommodate the fundamental unreliability of parol evidence; the principal theories (in order of importance) are:

• incorporation by reference
• outside the will (‘dehors’) theory • fraud theory

i. ‘incorporation by reference’:

can be easily disposed of as a stand-alone theory, for the simple reason that the doctrine only applies to documents, whereas secret trusts frequently concerns oral testimony; nonetheless it may to an extent (by a process of analogy) explain some of the rules concerning ‘timely communication’.

ii. outside the will (‘dehors’) theory:
In Cullen v AG for Ireland Lord Westbury established the ‘dehors’ theory, when he stated:

“where there is a secret trust, or where there is a right created by a personal confidence reposed by a testator in any individual, the breach of which confidence would amount to a fraud, the title of the party claiming under the secret trust, or claiming by virtue of that personal confidence, is a title dehors the will, and which cannot be correctly termed testamentary.”

Viscount Sumner in Blackwell v Blackwell [1929] affirming that:

“It is communication of the purpose to the legatee, coupled with acquiescence or promise on his part, that removes the matter from the provision of the Wills Act and brings it within the law of trusts…”

This idea, of treating the secret trust/s as essentially ‘non-testamentary’, can be critiqued on a variety of grounds:

  1. it fails to explain why secret trusts place such a great emphasis on trustee ‘acceptance’/‘acquiescence’ (normally not a requirement in English law for the creation of a valid trust).
  2. it appears to affirm, even to establish a false dichotomy between the law of wills, and the law of trusts, that cannot be easily upheld.
  3. it suggests a very narrow, and indeed historically inaccurate view of what constitutes a ‘will’, in harsh contrast with the open texture of s. 1 Wills Act 1837 which states that: ‘the word “will” shall extend to a testament, and to a codicil… and to any other testamentary disposition’; which would seem to comfortably cover both fully and half- secret trusts.
  4. but perhaps most importantly: “it still fails to address the fundamental objection that the evidence the court admits is inherently unreliable.”

iii. fraud theory:

Lords’ Bill 1673 which provided the wording of s. 7 1677 Act

Drawing on s. 7 Statute of Frauds 1677, Thynn v Thynn (1684) clearly establishes the close (potential) connection between fraud and secret trusts, though it must be recalled that the vast majority are simply enacted, not contested. And indeed, for some 200 years it appears “equity would enforce the promise as a trust obligation over the property only in the case of actual fraud.” McCormick v Grogan (1869) was a game changer, when there was a shift away from the requirement of fraudulent ‘induction’, to the courts (assuming there was adequate communication) allowing the testator and legatee/trustee to jointly defy the Wills Act, equity enforcing any such agreement against the legatee.

In cases such as Blackwell [1929] (see Viscount Sumner’s quote above) and re: Snowden [1979] we see the modern day court’s willingness to enforce FST’s with Mitchell even suggesting it may be a way for an aged testator to continually update how their property will be vested up and until their ultimate demise; the only ‘fraud’ necessary being the legatee’s refusal to follow through on what is essentially an informal agreement.

As regards HSTs, the trust is already on the face of the will, and so the only remaining option is what we might think of as ‘fraud on the beneficiaries’ which as Sheridan has pointed out, is in itself a tautology.

While Matthews (2010) has argued that s. 9 of the Wills Act may not apply to testamentary trusts at all, the judges (and many jurists) seem to think otherwise, and so we are finally left with a Gordian knot of possibilities; Chambers favouring a ‘constructive’ interpretation, Swadling an ‘express’ (with ‘fraud’ tipping the balance towards a Rochefoucauld paradigm) whilst Penner suggesting they should not be enforceable at all.

Personally of the three I find Swadling takes the day by a neck, though Penner’s objections are also entirely valid, but it does also strike me, that as in many areas of law these might be best considered as simply one of a kind (sui generis) trusts if you will, with equity drawing on a variety of justifications as it attempts to balance the books of conscionability/ unconscionability. Unfortunately, at least to a degree, we are left in the dark (just as are the other legatees in a FST) as to the exactitudes of the theoretical engine that is driving these decisions.

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