<\/p>\n
Under the Wills Act 1837 a will, or \u201cany other testamentary disposition”,1 must be in writing and signed<\/p>\n
by the testator and two witnesses, who are all present at the same time.2 Thus Parliament has felt it<\/p>\n
necessary to provide strict and mandatory rules under which certain formalities have to be observed<\/p>\n
when property is disposed upon death. Therefore, it may seem puzzling that English courts charged,<\/p>\n
as they purportedly are, with giving effect to the intentions of Parliament have at times upheld certain<\/p>\n
trustswhich attempt to leave property after death, butwhich have not complied with the required<\/p>\n
formalities. If a testator leaves his property by his will3 to someone absolutely and beneficially but,<\/p>\n
while alive, has informed this other party4 that the property is to be held on specified trusts then,<\/p>\n
provided this party accepts the trust,5 it is enforceable.6 Alternatively the testator may leave *CONVPL<\/p>\n
493 property to another party with a direction in the will that it is to be held on trust, and details of the<\/p>\n
trusts are not contained in the will but have been communicated to this party before or at the time of<\/p>\n
the will,7 and here the trust will also be enforceable.8 Aware that in upholding these \u201csecret” and<\/p>\n
\u201chalf-secret” trusts the courts could be accused of subverting the policy of the Wills Act, as the above,<\/p>\n
introductory contention maintains, the judiciary and commentators have sought to provide<\/p>\n
justifications for the existence of these trusts. However, i will argue that neither of the two<\/p>\n
principal arguments which have emerged effectively refute the contention made above. My<\/p>\n
submission is that the doctrine of secret trusts was first applied as a valid use of the courts equitable<\/p>\n
jurisdiction, but its continued existence, divorced from its original function and context, can no longer<\/p>\n
be justified.<\/p>\n
Many modern commentators refute the contention that the courts, in upholding secret trusts, are<\/p>\n
deviating from this policy, by arguing that secret trusts operate outside of this act. The Wills<\/p>\n
*CONVPL 494 Act, as we have seen, applies to testamentary dispositions, and some have argued<\/p>\n
Page1<\/p>\n
that it does not apply to secret trusts, for these are in fact inter vivos trusts. The theory postulates two<\/p>\n
distinct stages in the creation of a valid secret trust; with the trust being created by the communication<\/p>\n
of the trust to the proposed trustee and his acceptance of it, but the trust remains incompletely<\/p>\n
constituted until the property is vested in the trustee upon the death of the testator.10 The trust is<\/p>\n
enforced not under the will, but because of the previous agreement.11<\/p>\n
Judicial support for this modern theory that secret trusts operate en dehors of the will can be, and has<\/p>\n
been, found. In Blackwell v Blackwell, Viscount Sumner said \u201cI do not see how the statute-law relating<\/p>\n
to the form of a valid will is concerned at all”,12 and so these trusts are governed not by the rules of<\/p>\n
probate but by the rules of the law of trusts. This notion had already been referred to in Cullen v<\/p>\n
Attorney-General for Ireland, 13 and later in Snowden, Re per Megarry V.C.:<\/p>\n
\u201cthe whole basis of secret trusts, as I understand it, is that they operate outside the will, changing<\/p>\n
nothing that is written in it, and allowing it to operate according to its tenor, but then fastening a trust<\/p>\n
on to the property in the hands of the recipient.”14<\/p>\n
Decisions following Blackwell v Blackwell do seem to have taken this analysis as being the true<\/p>\n
nature of secret trusts. The decision in Young, Re, 15 for example, that a beneficial interest under a<\/p>\n
secret trust could be upheld even though the beneficiary was a witness to that will, was upheld on the<\/p>\n
ground that gifts under secret trusts were not taken under wills. Otherwise the normal rule that a<\/p>\n
witness to a will forfeits any beneficial interest arising under it would have applied.16<\/p>\n
However I submit that a closer analysis of this temptingly neat theory reveals it to be flawed. The<\/p>\n
theory claims that secret trusts are governed by the law of trusts and not that of probate, and yet<\/p>\n
these trusts involve a departure from the usual rules pertaining to trusts. For in upholding secret<\/p>\n
trusts, the courts are allowing *CONVPL 495 trusts to bind after-acquired property, and under the<\/p>\n
normal rules of trusts it is impossible to declare an immediate trust of future property,17 or a trust<\/p>\n
which binds such property as and when it is received.18 Critchley has refuted this argument on the<\/p>\n
basis of what she sees as a much bigger problem; that, in asserting that secret trusts are inter vivos<\/p>\n
rather than testamentary dispositions, the dehors theory is using the terms without fully recognising<\/p>\n
their correct legal meanings, and has confused \u201coutside the will” with \u201coutside the Wills Act”.19 She<\/p>\n
points out that Cullen v Attorney-General for Northern Ireland 20 was a decision relating to tax<\/p>\n
statutes, and claims that it was a mistake to apply the reasoning of this case to the different legal<\/p>\n
context of the formal requirements of the Wills Act.21 Furthermore, as Pearce and Stevens have<\/p>\n
pointed out, the decision in Maddock, Re 22 is inconsistent with this view, whereby a gift by way of a<\/p>\n
secret trusts was treated as if it had been made by will.23 It is also worth pointing out that later cases<\/p>\n
often rely on the reasoning of Lord Sumner in Blackwell v Blackwell, but on a close analysis of his<\/p>\n
speech, his argument is often inconsistent.24<\/p>\n
If we cannot agree with the idea of secret trusts as being accounted for under the rules of inter vivos<\/p>\n
trusts, we must then accept that their existence does mark a departure from the Wills Act, as the<\/p>\n
following quotation suggests. Lord Hatherley L.C. admits that the doctrine \u201cinvolves a wide departure<\/p>\n
from the policy which induced the Legislature to pass the Statute of Frauds”25 , but finds this<\/p>\n
departure justified by equity’s jurisdiction as the \u201ccourt of conscience”. The earliest judicial explanation<\/p>\n
for the existence of secret trust doctrine is that it exists to prevent fraud by the secret trustee26 ; and<\/p>\n
this idea is explained most fully by the House of Lords in McCormick v Grogan :<\/p>\n
*CONVPL 496 \u201cit is only in clear cases of fraud that this doctrine has been applied–cases in which<\/p>\n
the Court has been persuaded that there has been a fraudulent inducement held out on the part of<\/p>\n
the apparent beneficiary in order to lead the testator to confide to him the duty which he so undertook<\/p>\n
to perform.”27<\/p>\n
Lord Westbury concurred, finding that the court must see that \u201ca fraud, a malus animus, is proved by<\/p>\n
the clearest and most indisputable evidence” before applying the doctrine.28 Similar arguments were<\/p>\n
advanced in Pit Rivers, Re, where Vaughan Williams L.J. said that the court never \u201cgave the go-by” to<\/p>\n
the provisions of the Wills Act by enforcing upon any one testamentary dispositions not expressed in<\/p>\n
the shape and form required by the act, except in prevention of fraud.29 In fully-secret trusts, unless<\/p>\n
evidence of the trust is admitted contrary to the provisions of the Wills Act, the intended trustee will be<\/p>\n
able to take the property beneficially and will profit from his own misconduct, so this justification for<\/p>\n
the enforcement of these trusts on this basis does seem valid. Here equity would be acting in a way<\/p>\n
with which we are familiar in other areas of the law, such as in Rochefouchauld v Boustead. 30<\/p>\n
However, this original and narrow conception of the \u201cfraud theory” does not explain the existence of<\/p>\n
half-secret trusts. In such a trust, the intended trustee takes the property as trustee on the face of the<\/p>\n
Page2<\/p>\n
will, and there is no possibility of him taking beneficially even if the court declined to admit evidence of<\/p>\n
the terms of the trust. He would hold the property on resulting trust for residue or next of kin.31<\/p>\n
Moreover, even in cases of fully-secret trusts, the case law exhibits examples of where any<\/p>\n
justification on the basis of a \u201cmalus animus ” is no longer valid. The \u201cfraud theory” has been<\/p>\n
extended in an attempt to encompass a justification of half-secret trusts and the modern case law.<\/p>\n
Hodge argues that it is not the personal fraud of the purported legatee, but a general fraud committed<\/p>\n
upon the testator and the beneficiaries by reason of the failure to observe the intentions of the former<\/p>\n
and of the destruction of the beneficial interests of the latter, which secret trusts seek to avoid.32 This<\/p>\n
argument emerged as early as 1748 in Reech v Kennegal 33 where evidence *CONVPL 497 was<\/p>\n
admitted contrary to the Statute of Frauds \u201cin respect of the promise and of the fraud upon the<\/p>\n
testator in not performing it”, and in a passage in Riordan v Banon, 34 an Irish case which was cited<\/p>\n
with approval in Fleetwood, Re by Hall V.C.: \u201cit appears that it would also be a fraud though the result<\/p>\n
would be to defeat the expressed intention for the benefit of the heir, next of kin, or residuary<\/p>\n
donees.”35<\/p>\n
In Blackwell v Blackwell, Lord Buckmaster also adopted this wider version of the fraud argument<\/p>\n
(Lord Hailsham L.C. concurring), claiming that \u201cthe personal benefit of the legatee cannot be the sole<\/p>\n
determining factor in considering the admissibility of the evidence” that if a clear promise is made by<\/p>\n
the intended trustee, inducing a gift to be made in his will, \u201cthe trustee is not at liberty to suppress the<\/p>\n
evidence of the trust and thus destroy the whole object of its creation, in fraud on the beneficiaries.”36<\/p>\n
While Blackwell v Blackwell was a case concerning a half-secret trust, it is clear that this reasoning<\/p>\n
was intended to apply equally to fully-secret trusts.<\/p>\n
However, there does exist a huge flaw in extending the theory this far; it amounts to no more than a<\/p>\n
bald assertion that a testator’s wishes should be respected even if he has put them into effect in a<\/p>\n
manner that is not acceptable (that is, not in compliance with s.9 of the Wills Act). In many cases the<\/p>\n
true intention of the testator cannot be put into place, and purported beneficiaries under ineffective<\/p>\n
wills are routinely deprived of property which testators or settlors would desire them to have, simply<\/p>\n
because trusts and wills have not been put into effect in the proper manner. The tradition equitable<\/p>\n
maxim that \u201cequity will not permit a statute to be used as an instrument of fraud” must be adapted to<\/p>\n
something more like \u201cequity will not allow a statute to be used so as to renege on a promise” if it is to<\/p>\n
fit with the situations envisaged in Blackwell v Blackwell. As Critchley has pointed out, this widening of<\/p>\n
the fraud theory focuses \u201con potential, rather than actual, wrongdoing \u2026 the policy aim underlying (it)<\/p>\n
is thus proactive (or preventative) rather than reactive (or curative).”37 The very mild form of fraud<\/p>\n
which it envisages does not justify equitable intervention in the face of strict statutory provisions in the<\/p>\n
same way that a malus animus does.<\/p>\n
*CONVPL 498 In order to recap, the two principal arguments which have been advanced in order to<\/p>\n
justify and explain the existence of secret trusts do not seem to give the all-embracing and logical<\/p>\n
explanations which they purport to provide. It seems that the doctrine developed organically,<\/p>\n
changing on a case to case basis in order to suit the particular situations which arose.<\/p>\n
I would disagree, arguing that these reasons are not sufficient to demand the continued existence of<\/p>\n
secret trusts. There ismuch to *CONVPL 500 be said for an abolition, or at least a fundamental<\/p>\n
revision, of the law relating to them, as the law is confused, and justifications for the distinctions<\/p>\n
between the two types of secret trusts are difficult to find. They serve a very limited social purpose<\/p>\n
and fraud would be better prevented by an insistence upon compliance with the requirements of the<\/p>\n
Wills Act.<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
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