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 NORTH EAST LAW REVIEW

KEEPING SECRETS: A CRITICAL ANALYSIS OF THE

JUSTIFICATIONS FOR THE DOCTRINE OF SECRET
TRUSTS

Ho Siu*

1 INTRODUCTION
Secret trusts give effect to a testator's express intentions that are not contained in the
will.1 They are a device by which the testator's intention to create a testamentary gift
by way of a trust may be enforced despite non-compliance with the formalities of due
execution of a will under the Wills Act 1837 (hereafter Wills Act). Typically, secret
trusts arise where a testator dies leaving a legacy to a legatee under a will on the
understanding that the legatee will hold the property on trust for the benefit of
beneficiaries who are not named in the will. Here, the legatee is a 'secret trustee' and
the beneficiaries, 'secret beneficiaries'.

Primafacie,secret trusts operate in the face of parliamentary legislation3 giving them

the 'go-by'. 4 The underlying policy of the Wills Act formalities is the reduction of
fraud, uncertainty and doubt. 5 Compliance with the provisions signifies that there is
reliable evidence of testamentary intention in the will and in its terms.6 Furthermore,
the requirements of independent witnesses7 and attestation 8 aim to minimise dangers
of fraud and undue influence on the testator's decisions. 9 The enforcement of a secret
trust therefore, 'represents a departure from [the] sound policy' of the Wills Act. 1°
'Where equity effectuates secrecy, it sometimes appears to create conceptual
anomalies', thus, there must be a convincing explanation as to why testators are
allowed to escape statutory formalities when creating secret trusts." The

* Newcastle University LLB (Hons) Law.

1
John McGhee, Shells Equity (32nd edn, Sweet & Maxwell 2010) para 24-023.
2 9.
3 Statuteof Frauds 1677; Wills Act 1837; Law of Property Act 1925.
4
Re Pitt-Rivers [1902] 1 Ch 403 (CA) 407.
5Murali Kandasamy, 'Secret Trust: The Underlying Theories Explained' (2012) 1 Brickfields Law
Review 16, 16.
6John H Langbein, 'Substantial Compliance with the Wills Act' (1975) 88 Harv L Rev 489, 492.
7Wills Act 1837, s 9(c).
sibid s 9(d)(i).
9Charles I Nelson and Jeanne M Starck, ' Formalities & Formalism: A Critical Look at the Execution
and of Wills' (1979) 6 Pepp L Rev 331, 348.
10
Kandasamy (n 5) 16.
11Susan Scott-Hunt and Hilary Lira, FeministPerspectives on Equity and Trusts (Routledge Cavendish
2001) 65.
 KEEPING SECRETS

identification of the justification for the enforcement of secret trusts would allow an
assessment of whether the courts are justified in giving effect to such 'anomalies'.

This article explores the basis to the enforcement of secret trusts and assesses their
adequacy in justifying the contravention of parliamentary legislation. The two main
rationalisations, the fraud theory and the Dehors theory will be assessed in sections 2
and 3. The penultimate section addresses alternative theories to the enforcement of
secret trusts, and the final section concludes which justification is the most adequate
basis to secret trusts. However, it is first necessary to briefly explain how secret trusts
operate.

1.1 Fully andhalf secret trusts

There are two types of secret trusts. Fully secret trusts arise when the legatee appears
to take the property absolutely under the will, but in reality holds the property subject
to the terms of the secret trust. Such trusts can also arise on intestacy. Here, the
testator's intestate successor informally agrees to hold the property that they will
receive on trust for the secret beneficiary. Half secret trusts arise when the trust is
evidenced on the face of the will but its terms are undisclosed.

In order to be valid both forms of secret trusts require three elements, intention of the
testator to create a trust, communication of this intention to the legatee and acceptance
or acquiesce by the legatee to carry out the undertaking. 12

1.2 The acceptance of half secret trusts

Historically, fully secret trusts were recognised by the courts on the basis of fraud.
Arguably the earliest example of secret trusts is Thynn v Thynn in 1684.13 The court's
decision to hold the son to his promise to hold his father's property as his mother's
trustee was based on personal fraud. In Devenish v Baines the courts, again, enforced
the informal trust agreement on the basis of fraud. 14

Due to the difficulty in reconciling fraud, particularly personal fraud, with half secret
trusts, the courts did not accept them until 1929 in Blackwell v Blackwell.15 Since the
trust is evidenced in the will, it is unlikely that the trustee could fraudulently claim the
property. The exception is where the trustee is the beneficiary of the residuary
estate. 16 Here, the trustee could claim the property through a resulting trust by relying
on statutory provisions to invalidate the trust. However, such cases are rare.
Therefore, Viscount Sumner questioned, why 'over a mere matter or words, [the
courts of equity should] give effect to them in one case and frustrate them in the

12 Ottaway v Norman [1972] Ch 698 (Ch) 702.

13 (1684) 1 Vern 296, 23 ER 685.
14 (1689) Prec Ch 3, 24 ER 2.
15 [1929] AC 318 (HL).
16 ibid 328 (Lord Buckmaster).
 NORTH EAST LAW REVIEW

other?' 17 Thus in Blackwell18 the court accepted half secret trusts on the basis that
fraud could also be committed on the 'real beneficiaries' 19 and on the testator's
promise that the trust would be carried out. Fraud as a basis for secret trusts will be
further assessed in the next section.

2 ASSESSING THE FRAUD THEORY AS A JUSTIFICATION FOR

SECRET TRUSTS
Traditionally, the court's justification for the enforcement of secret trusts was the
prevention of fraud. In fully secret trusts, the fraud was the trustee's reliance on
statutory formalities to deny the trust in order to claim the trust property for himself/
herself. 21 This 'orthodox' view of fraud focuses on deceit and unjust enrichment by
the trustee. However, following the acceptance of half secret trusts in Blackwell fraud
was extended to include fraud on the testator's promise and on the interests of the
secret beneficiary. This section assesses the validity of both the orthodox and the
extended view of fraud as explanations to the enforcement of secret trusts, despite
non-compliance with statutory formalities. 23 However, in order to appreciate the
court's use of fraud as a justification for secret trusts it is necessary to examine the
basis of the theory itself.

2.] The doctrine offraud

Historically, the doctrine of fraud was the basis to which secret trusts were enforced.24
Underpinning the doctrine is the principle that equity will not permit a statute to be
used as an instrument of fraud.25 Trust formalities, particularly requirements of
written evidence, aim to combat fraud and mendacity. Indeed, the full title of the
Statute of Frauds 1677 (the predecessor to the Wills Act) was 'An Act for the
Prevention of Frauds and Perjuyres [sic]'. 26 The formalities aimed to impede 'hidden
oral transactions in fraud of those truly entitled' .27

However, there are instances where the statutory formalities are used fraudulently. It
is in these cases that equity sets them aside so as to preclude the occurrence of fraud.
In Rochefoucauld v Boustead28 it was held that the Statute of Frauds could not be used
to prevent proof of fraud. 29 The courts held that it would be fraudulent for a person to
whom land is conveyed to as a trustee to deny the trust for lack of formality and claim

17
ibid 335.
18(n 15).
19ibid [328] (Lord Buckmaster).
2
1 ibid.
21
Wills Act 1837, s 9.
22
(n 15).
23 Wills Act 1837, s 9.
24
McCormick v Grogan (1869) LR 4 HL 82 (HL) 88.
25
Mestaer v Gillespie (1805) 11 Ves Jr 621, 628; 34 ER 1230, 1232 (Lord Eldon).
26 Statute of Frauds 1677.
27 andervellvIRC [1967] 2 AC 291 (HL) 311 (Lord Upjohn).
28 [1897] 1 Ch 196.
29
ibid 201.
 KEEPING SECRETS

the land absolutely.3 ° Claims that the oral trust was invalid due to its non-compliance
with section 731 (the predecessor to section 53(1)(b) which requires declarations of
trusts in land to be in writing) 32 were dismissed. Thus, oral evidence that alluded to
the defendant's knowledge that the land was conveyed to him as a trustee was
admitted.33 The trust was upheld on the basis that the Statute of Frauds could not be
used to facilitate fraud. It would be perverse to allow the defendant to rely on the
plaintiffs non-compliance with formalities to claim absolutely the land, which was
given to him as a trustee. Otherwise it would be inconsistent with the court's assertion
that 'it will not allow the Statute of Frauds to be made into an instrument of fraud'. 34

In Singh v Anand it was held that the defendants could not rely on lack of written
evidence to claim that they had a beneficial interest in the claimant's shares.35 Rather,
they were trustees of the shares, merely 'holders of a bare legal title'.S36 A contrary
conclusion would have allowed the defendants to use the requirements of section
53(1)(c) as an 'engine of fraud'. Rochefoucauls v Boustead was applied and Norris J
held that the lack of valid assignment to the equitable interests in the shares did not
convert the defendants into its beneficial owners. 8 The defendants could not rely on
33
the formalities of transfer to deny the trust and keep the shares beneficially.39

Pawlowski argues that the rule in Rochefoucauld does not circumvent section
53(1)(b). 40 Rather, it operates to prevent what would otherwise be fraudulent conduct
on the part of the trustee by denying the trust. 41 It merely effectuates the original trust
that was created by the parties' intentions. Critchley correctly asserts that the doctrine
of fraud is founded upon legal policy. 42 It is based on the reasoning that the strict
enforcement of statutory formalities may sometimes be counterproductive. For
example, in circumstances where unscrupulous trustees utilise formality requirements
to fraudulently deny the existence of a trust. It is objectionable that the legal system
and its constituent rules should be abused in this way.43 Allan argues therefore that

3
1ibid.
31Statute of Frauds 1677.
32
Law of Property Act 1925.
33
Rochefoucauld (n 28) 207.
34
Heardv Pilley (1869) LR 4 Ch App 548 (CA) 553 (Giffard LJ).
35 [2007] EWHC 3346.
36
ibid [144].
37
Law of Property Act 1925; Singh (n 35) [144].
38
Singh (n 35) [144].
39
ibid.
40
Mark Pawlowski, 'Fraud, Legal Formality and Equity' (2001) 23 Liverpool L Rev 79, 81.
41 ibid.
42
Patricia Critchley, 'Instruments of fraud, testamentary dispositions, and the doctrine of secret trusts'
(1999)
43
115 LQR 631, 647.
ibid.
 NORTH EAST LAW REVIEW

secret trusts are enforced to avoid perpetuating fraud through the trustee's reliance on
44
statutory provisions.

2.2 The doctrine offraud andsecret trusts

The doctrine of fraud was clearly laid down in the case of McCormick v Grogan as
the justification for secret trusts. 45 Lord Hatherley provided that the prevention of
fraud is the 'sound foundation' to which secret trusts are enforced.46 Lord Westbury
asserts that the basis to which secret trusts are enforced is to prevent fraudulent
reliance on statutory rights.47 He further provides that where a legatee sought to do so,
'equity will fasten on the individual ... a personal obligation because he applies the
Act as an instrument of fraud'. 48 'Personal obligation' meaning that equity will
require the individual to act in personam over the received property. The legatee
becomes a trustee over the property on the basis that the courts will not allow a
legatee to set up the lack of formality so as to allow him to cloak his fraud.4 9

2.3 The orthodox view offraud

To determine whether a secret trust should be enforced on the basis of the trustee's
fraudulent conduct, it is necessary to know what constitutes fraud in this context.
McCormick is generally regarded as providing the orthodox view that fraud in secret
trusts requires personal gain by the trustee. 50 Usually the trustee would seek to
unjustly enrich himself by denying the trust. Therefore, due to the testator's reliance
on the legatees promise that he would hold the property on trust for another, equity
enforces the secret trust to prevent the trustee from taking the property absolutely.5 1
Here, fraud is of a deceitful nature, it is founded on deliberate and conscious
wrongdoing. Primafacie, Lord Westbury's judgment supports this reading of fraud,
stating that in order to convert the legatee into a trustee it must be shown that the
legatee had acted in malo amino.5 2 The legatee must have distinctly known that the
testator was 'beguiled and deceived by his conduct' .

This narrow reading of fraud requires a higher standard of proof than the ordinary
civil standard. 54 The courts must be persuaded by the 'clearest and most indisputable
evidence' 55 that there has been 'fraudulent inducement' 56 on the part of the legatee,

44 G
W Allan, 'The Secret is Out There: Searching for the Legal Justification for the Doctrine of Secret
Trusts
45
through Analysis of the Case Law' (2011) 40 Comm L World Rev 311, 312.
McCormick (n 24).
46
ibid 88.
47 ibid 97.
48
ibid.
49 Thomas
Glyn Watkin, 'Cloaking a Contravention' [1981] Cony 335, 338.
50
McCormick (n 24).
51
j G Fleming, 'Secret Trusts' [1947] Cony 28, 29.
52
McCormick (n 24) 97.
53
ibid 98.
54
Re Snowden [1979] Ch 528 (Ch) 536.
55
McCormick (n 24) 97.
56
ibid 89.
 KEEPING SECRETS

which led the testator to make a legacy in his favour. The testator does so, on reliance
of the promise from the legatee that he will hold the property as a trustee. Therefore,
'fraud' in the narrow sense is based on the deceitful nature of the legatee's conduct at
the time that he makes the promise to the testator.5 7 It is this promise and the fact that
the will was set up on the strength of it, that is significant. 58

The orthodox view of fraud therefore operates to prevent unjust enrichment and
wrongdoing by the legatee. Problematically however, this reading of fraud fails to
explain half secret trusts. The evidence of the trust in the will rules out any possibility
of fraud from profit on the part of the trustee. 59 Rather, the trustee would hold the
property on a resulting trust for the testator's estate or his statutory next of kin.6 °

Pearce and Stevens argue that upon this orthodox understanding of fraud, it would be
better to impose a resulting trust in favour of the trustee's estate instead of enforcing
the half secret trust. 6 1 If the purpose of secret trusts is to prevent such fraud then the
imposition that a resulting trust would be sufficient to achieve this since it is unlikely
that the trustee could profit by denying the trust. 62 However, if the courts did this then
it would potentially invalidate the use of half secret trusts altogether, yet clearly this is
not what the courts are aiming to do when enforcing half secret trusts. Therefore, as
understood in its narrow sense, the imposition of half secret trusts goes beyond what
is necessary for the prevention of fraud. Thus, the orthodox reading of fraud cannot
satisfactorily justify half secret trusts.

However, as discussed earlier the trustee of a half secret trust could fraudulently rely
on statutory provisions to claim the property where he is also the residuary
beneficiary. Oakley argues that theoretically the trustee should be able to do this, as
he would be claiming in a different capacity of which the testator must have been
aware. 63 Rather than claiming as a trustee, he would be claiming the property as the
residual beneficiary.64 Thus, fraud would occur where the trustee knows that as the
residual beneficiary he would be able to benefit through the non-enforcement of the
secret trust. Andrews argues therefore, that half secret trusts could be enforced to
prevent this from occurring. 65 However, Andrews correctly argues these cases would
be rare. 66 Therefore, normally the orthodox interpretation of fraud cannot justify half
secret trusts.

57
David R Hodge, 'Secret Trusts: The Fraud Theory Revisited' [1980] Conv 341, 343.
58
j A Andrews, 'Creating Secret Trusts' [1963] Conv 92, 96.
59
ibid 98.
60
Re Pugh's Wills Trust [1976] 1 WLR 1262 (Ch).
61
R Pearce and J Stevens, The Law of Trusts and Equitable Obligations (5th edn, OUP 2010) 259.
62 Sukhninder Panesar, Exploring Equity and Trusts (2nd edn, Pearson 2012) 204.
63
A J Oakley, Constructive Trusts (3rd edn, Sweet & Maxwell 1997) 246.
64
ibid.
65 Andrews (n 58) 102.
66
ibid.
 NORTH EAST LAW REVIEW

2.4 The extendedfraud theory

Allan argues, that that the orthodox interpretation of Lord Westbury's judgment is
incorrect.6 7 Rather, when the judgment is read in full, a different interpretation of
fraud emerges. 68 According to Allan, what Lord Westbury meant was that once the
secret trustee has led the testator to believe that he will perform the trust by agreeing
to the testator's requests, equity will insist that he fulfils his agreement.6 9 Otherwise, it
would be fraud on the testator's promise as he would have been 'beguiled and
deceived' by a legatee who has failed to undertake what he had promised.70
According to this interpretation therefore, where the trustee does not perform a
properly communicated and accepted secret trust, he/she is committing a personal
fraud on the testator and are acting malus animus.7 1 The emphasis here is to prevent
the secret trustee from reneging on his promise. 72

This wider understanding of fraud extends beyond unjust enrichment. Rather it

focuses on ensuring that the deceased's wishes are not defeated and that the
beneficiaries' intended interests are not defrauded.73 Support for this view can be
found in the case of Norris v Frazer.74 Here, there was no evidence to suggest that the

secret trustee sought fraudulent enrichment. The wife, the secret trustee, was not in a
position to gain personally by denying the trust, as the annuity that the testator had
arranged to be paid to the secret beneficiary was paid out of the husband's bank
account.75 Nor was there evidence of fraudulent conduct by the husband. In fact it was
held by Bacon VC that his conduct had been 'frank and honourable and fair in every
,76
respect' . Nevertheless, despite the lack of fraudulent enrichment, the trust was
enforced. It was held that 'a more direct ... personal fraud could not be committed
than for [the wife] to refuse to perform that promise which she made to the testator' .77

Thus, the essential element to this wider concept of fraud is the need to preserve the
agreement between the legatee and the testator who set up his will to reflect this
promise . 78 This understanding of fraud focuses on the harm caused to the testator
through the breach of a promise by the secret trustee. Furthermore, there is also an

67
Allan (n 44) 319.
68 ibid 318.
69
ibid.
70
McCormick (n 24) 97.
71
ibid.
72
Allan (n 44) 319.
73 Oakley (n 63) 247.
74
(1873) LR 15 Eq 318 (Ch).
75
ibid 318.
76
ibid 330.
77 ibid 331.
78
David Wilde, 'Secret and semi-secret trusts: justifying the distinctions between the two' [1995] Cony
366, 369.
 KEEPING SECRETS

emphasis on the harm caused to the beneficiaries. They are defrauded through the
destruction of a beneficial interest that the testator had intended for them to receive.79

This extensive notion of fraud is not a new development. It can be seen as early as the
eighteenth century in Reech v Kennegal.80 Here, Lord Hardwicke states that there is
'fraud also upon the testator' 81 where the legatee who represents that there was no
need to alter the will and that the intended beneficiaries will be enriched fails to live
up to this promise. 82 In this case the secret trustee did stand to gain from denying the
trust. However, this was not emphasised by Lord Hardwicke. Obviously this cannot
be viewed to be a complete dismissal of personal gain by his Lordship. However, as
correctly highlighted by Allan, it is significant that he instead stressed that any failure
to perform the secret trust would amount to fraud. 83 The view that fraud also
encompasses fraud upon the testator was expressed more clearly in Re Fleetwood84 by
Hall VC who approved and cited the Irish case of Riordan v Banon.85 His Lordship
provided that where the testator makes a disposition to the secret trustee on the faith
of him carrying out a promise then it would be fraudulent for the trustee to refuse to
86
perform the agreement.

Fraud can also be committed on the interests of the secret beneficiaries. Lord
Buckmaster in Blackwell provided that the trustee is 'not at liberty to suppress the
evidence of the trust and thus destroy the whole object its creation, in fraud of the
beneficiaries' .87 It seems therefore that Lord Buckmaster grounds the notion of fraud
upon the destruction of the beneficial interests rather than on deceit by the secret
trustee or fraudulent enrichment. This view of fraud was also endorsed in by Lord
Justice Scott. 88 Here, his Lordship stated that it is a mistake to suppose that
impositions of secret trusts are 'confined to cases in which the conveyance itself was
fraudulently obtained'.89

Understood in its wider form, fraud justifies the enforcement of half secret trusts. In
light of this wider view of fraud, the imposition of resulting trusts as a solution to the
lack of fraudulent enrichment in half secret trusts would be inappropriate. 90 This is
because it would result in fraud upon the beneficiary, as the property would be
directed to someone other than him or her. Their interests under the trust would be

79
Hodge (n 57) 343.
80 (1748) 1 Ves Sen 123, 28 ER 461.
81
82 ibid 124.
ibid.
83
Allan (n 44) 315.
84(1880) 15 ChD 594 (Ch).
85(1876) 10 Ir Eq Rep 649.
86
Re Fleetwood (n 84) 606, 607 (Hall VC).
87
(n 15) 329.
88 [1948] 2 All ER 133 (CA).
89
ibid 136.
90
Pearce and Stevens (n 61) 259.
 NORTH EAST LAW REVIEW

defeated through the redirection of the property. 91 Furthermore, the wishes of the
testator would also be defeated as he loses the ability to dispose of his property as he
92
had originally intended.

2.5 The problem of the 'honest trustee'

The wider view of fraud also adequately deals with the problem of the 'honest
trustee'. If the orthodox interpretation of fraud is applied, then a trustee of a fully
secret trust who from the beginning proclaims the existence of the trust cannot
unjustly enrich himself by virtue of his admission and the trust would not be
enforced. 93 On the orthodox view of fraud secret trusts are enforced in order to
prevent the trustee from fraudulently gaining the beneficial interest through relying on
statutory provisions to defeat the trust. However, Critchley correctly notes that this is
not possible where the trustee acknowledges the trust. 94 Here, the secret trust fails, as
there is no fraud. The secret trust would not be enforced and the trustee would hold
the property on trust for the residual legatee. 95 In contrast, had the trustee denied the
trust, the fraud theory would have operated to enforce the promise and the secret
beneficiary would have received his/her interests. 96 Undesirably, this may encourage
some trustees (such as those connected to the secret beneficiary) to falsely deny the
trust in order for the fraud theory to operate to enforce the agreement. An example of
this can be found in Muckleston v Brown.97 Here, the trustee sought to rely on the lack
of compliance to statutory formalities in order to prevent the trust from failing under
the Statute of Mortmain 1736. It can be observed that there was no selfish motive here
on the part of the trustee. 98

However, if the extended reading of fraud is applied, then the honest trustee is no
longer a difficulty. The trustee would hold the property on trust for the secret
beneficiary in all cases. This is because it would always be fraud to deny the
beneficiaries their interests under the trust, regardless of any absence of unjust
enrichment through fraudulent conduct. 99 Thus the wider understanding of fraud
removes the difficulty of the honest trustee who, on the application of the orthodox
view, through his honesty defeats the secret trust through lack of fraudulent conduct
and unjust enrichment.

91 Critchley (n 42) 649.

92
ibid.
93
ibid 651.
94
95 ibid.
Hodge (n 79) 348.
96
ibid.
97 (1801) 6 Ves Jr 52, 31 ER 934.
9
' Critchley (n 42) 651.
99
Hodge (n 79) 343.
 KEEPING SECRETS

2.6 Difficulties with the extendedfraud theory

A difficulty with the extended fraud theory is that it seemingly amounts to 'a bald
assertion 00 that the testator's wishes should always be respected even when they are
implemented in a manner contrary to statutory provisions. Yet, there are other
instances in which the testator's intentions cannot be put into place and the purported
beneficiaries are routinely deprived of their interests, for example, in the constitution
of trusts. In Milroy v Lord it was held that a trust would fail where the settlor fails to
properly execute the transfer of the property to the trustee. 10 1 Here, the courts are
unwilling to enforce an improperly constituted gift because; 'every imperfect
instrument would be made effectual by being converted into a perfect trust' 102
Underlying this is the maxim that equity will not assist a volunteer nor will equity
perfect an imperfect gift. Yet, here the settlor's intentions have also been defeated due
to his failure to properly constitute the trust. However despite the deprivation of his
interests no argument of fraud against the testator is made. It is difficult to understand
why, traditionally, the courts have taken a strict approach in the constitution of trusts
whilst being willing to enforce secret trusts that directly contravene statutory
provisions. Additionally, where the will itself fails due to undue execution, the
intentions of the testator are similarly not effectuated. However, fraud against the
testator is not argued in these circumstances to uphold the will.

Critchley correctly argues that fraud on the beneficiaries is an insufficient justification

to secret trusts. This is because any formality requirement which results in rendering a
disposition void due to non-compliance would effectively deprive the beneficiary of
his/her interests. 103 If such a detriment to the beneficiary were sufficient to outweigh
the benefits of the formalities of section 9, then the provision would hardly ever
operate. 10 4 This is because the failure of the informal testamentary disposition would
almost always deny the beneficiary of his/her promised interest. Thus, whilst the
extended fraud theory is superficially an attractive justification to secret trusts, the
focus on the harm to the beneficiary and testator are insufficient grounds on which to
base the fraud. 105 This is because such harm would also arise every time a disposition
fails for informality. Therefore, in light of the issues just discussed, the extended
interpretation of fraud lacks the robustness needed to adequately support the existence
of secret trusts.

It is submitted that whilst fully secret trusts can be justified on the traditional doctrine
of fraudulent enrichment and deceit, half secret trusts cannot. 106 This is because such

100 Emma Challinor, 'Debunking the myth of secret trusts' [2005] Cony 492, 497.
101(1862) 4 De GF & J264, 45 ER 1185.
102 ibid 274, 275 (Turner LJ).
103Critchley (n 42).
104 ibid.
105 ibid 648.
106 Jill E Martin, Hanbury & Martin:.Modern Equity (15thedn, Sweet & Maxwell 1997) 153.
 NORTH EAST LAW REVIEW

107
fraud is justifiably more likely to occur where the trust is not mentioned in the will.
On the other hand, half secret trusts lack the likelihood of fraudulent enrichment
occurring since the trustee is named on the will. Thus the extended fraud theory does
not adequately explain fully secret and half secret trusts. Therefore, the justificatory
basis for half secret trusts must be something other than fraud.

3 ASSESSING THE DEHORS THEORY AS A JUSTIFICATION FOR

SECRET TRUSTS
As noted earlier, the traditional justification for the enforcement of secret trusts
despite their contravention of statutory formalities was the prevention of fraud.108
Secret trust enforcement prevented secret trustees from keeping the property by
relying on statutory formalities to deny the trust. 109 However, the orthodox view of
fraud cannot explain half secret trusts and the extended view is an insufficient basis to
half secret trusts. Thus it is necessary to examine other theories. This section will
assess the theory that secret trusts are enforced outside of the will as inter vivos trusts.

3.1 Secret trusts are inter vivos trusts that operate 'Dehors' the will
The modem view is that secret trusts are enforced because they operate independently
to the will. They are inter vivos express trusts and consequently operate 'outside the
will-Dehors the will'. 110 Since section 9111 applies to 'any ... testamentary
disposition' 112 and
this theory argues that secret trusts are not testamentary, 113 they are
therefore not subject to section 9.114 Subsequently, secret trusts do not give section
9115 'the go-by'. 116 Support for this can be inferred from Viscount Sumner's judgment

in Blackwell.117 His Lordship stated that he could not 'see how the statute-law relating
to the form of a valid will is concerned at all'. 118 Academics who favour this theory
argue that secret trusts are inter vivos trusts. 119 It is the arrangement during the
testator's lifetime between the testator and the legatee outside of the will that
'declares' the trust. 120 At this stage the trust is incompletely constituted. 121 It becomes
fully constituted when the testator dies and the property is transferred to the legatee

107 ibid.
108 Wills Act 1837, s 9.
109 ibid.
110
°Bryn Perrins, 'Secret Trusts: the Key to the Dehors?' [1985] Conv 248, 248.
"
112 Wills Act 1837.
ibid s 1.
113 Kandasamy (n 5) 16.
114 Wills Act 1837.
115 ibid.
116
Re PittRivers (n 4) 407.
117 [1929] AC 235 (HL).
118 ibid 334.
119
Perrins (n 110) 256.
120 Sarah Wilson, Todd & Wilson's Textbook on Trusts (11 edn, OUP 2013) 238.
121
Perrins (n 110) 250.
 KEEPING SECRETS

under the will. 122 Thus, the will is merely a mechanism, which enables the transfer of
123
property to the trustee.

The inter vivos argument is advantageous because unlike the fraud theory (as
understood in its orthodox form) it can be applied to both fully secret and half secret
trusts. Additionally, unlike the extended view of fraud, there is no need to artificially
stretch the term's traditional meaning of 'deceit' and 'unjust enrichment' in order to
validate half secret trusts.

3.2 Difficulties with the inter vivos argument

The crux of this argument is that secret trusts are inter vivos dispositions and are
therefore not subject to section 9.124 However, it is on this crucial point that the
argument fails. The theory's primary difficultly is that it asserts that during the
testator's lifetime, an incompletely constituted trust arises. However, this contradicts
the general rule that in order for an effective inter vivos trust to arise, the trust
property's legal title must be transferred to the trustee. 125 Milroy provides that in order
to render a trust 'valid and effectual' the settlor must have done everything that ought
to be done within the nature of the property to execute the transfer. 126 Yet clearly this
is not the case when the trust is 'declared' in a secret trust, as the legal title is not
vested in the trustee until the testator's death. Thus, by itself, the earlier agreement
between the two parties cannot generate an effective inter vivos trust. 127 Additionally,
the inter vivos trust described here contradicts the rule regarding express trusts in Paul
v Paul that provides that once validly created, a settlor cannot cancel a trust nor
recover the trust property. 128 However, the testator of a secret trust is able to dismantle
the trust at any time before his death. 129

A possible exception to the situation above is if the property was vested in the trustee
in consideration for the trustee's promise to hold it on trust. Here, the earlier
agreement creates a contractual obligation rather than a trust. Thus, if the property
was transferred to another, under the Contracts (Rights of Third Parties) Act 1999130
the secret beneficiaries could enforce the contract to claim for damages 131 against the
trustee. 132 Difficulties arise however if the beneficiary had also given consideration to
the testator for his promise to transfer the property to the trustee by will. If after this
the testator then amended his will so as to divert the property to another legatee there

122 ibid.
123 Wilson (n 120) 238.
124 Wills Act 1837.
125 Alastair Hudson, Equity and Trusts (6th edn, Taylor and Francis 2009) 214.
126
Milroy (n 101).
127Hudson (n 125) 322.
129 (1882) 20 ChD 742 (CA).
128
Alastair Hudson and Geraint Thomas, The Law of Trusts (2nd edn, OUP 2010) 817.
130 Contracts (Rights of Third Parties) Act 1999, s 1.
131 ibid s 1(5).
132 Simon Gardner, An Introduction to the Law of Trusts (3rd edn, OUP 2011) 95.
 NORTH EAST LAW REVIEW

would be conflict as to whom the property should benefit. In this situation both of the
beneficiaries would have legal rights to the property, 133 the secret beneficiary through
his/her contractual rights and the latter beneficiary though the gift in the will. This
would be problematic, as it would lead to the testator's executor being uncertain as to
how to distribute the property.

Hudson argues that an alternative view to the inter vivos argument is that the testator
had sought to declare a trust but had failed to constitute it until death. 134 Thus a gift of
property that is perfected by a trust arises. 135 However, this contravenes the rule in
Milroy136 that a trust cannot perfect a transfer that was intended to take effect by other
means. 137 It could be argued that due to the destabilisation of this rule in Pennington v
Waine, constitution would occur where it is deemed 'unconscionable' for equity to
deny the gift. 138 However, 'unconscionability' is difficult to define and lacks legal
certainty. What constitutes 'unconscionable' circumstances is unclear and does not
allow for predictability as to when trusts may be constituted. Furthermore a departure
from the strict rule above undermines the policy objectives underlying it. The
objective of the rule is to 'safe guard the position of the donor' and to protect the
donor's ability to change his mind before the constituting the trust. 139 If an imperfect
gift was perfected and the donor had changed his mind, it would be unfair to
subsequently impose the onerous duties of trusteeship on either the donor or the
elected trustee. Thus, in order to protect the donor's ability to change his mind and in
the 'interests of legal certainty' there must be clear rules as to when a trust is
constituted and effective. 14 Therefore, secret trusts cannot exist as inter vivos
incompletely constituted trusts.

3.3 Secret trusts as testamentary dispositions

As concluded, secret trusts cannot be inter vivos trusts. Instead, it is submitted that
they can be testamentary dispositions. During the testator's lifetime, testamentary
dispositions are ambulatory and revocable. The former means that they have a non-
binding effect until the testator's death. 141 Thus, the beneficiaries of testamentary
142
dispositions have no enforceable interests in them until the testator's death.
Revocability means that the disposition only takes effect on death.143 Due to their
ambulatory nature before death a testamentary disposition can be revoked at any point

133
Beswick v Beswick [1968] AC 58 (HL).
134 Hudson and Thomas (n 129) 822.
135
Hudson (n 125) 322.
136Milroy (n 101).
137 ibid 274.
138 [2002] 1 WLR 2075.
139 ibid 2090.
140 ibid.
141 Roger Kerridge, Parry andKerridge: The Law of Succession ( 12 th edn, Sweet & Maxwell 2009) 33.
12Re Smith [2001] 1 WLR 1937 (Ch).
143
John G Ross Martyn, Stuart Bridge and Mika Oldham, Theobald on Wills (16th edn, Sweet &
Maxwell 2001) para 2-09.
 KEEPING SECRETS

during the testator's lifetime even if it expressly states otherwise. 144 Similarly,
incompletely constituted inter vivos trusts are also revocable. However, as concluded
above the acceptance of secret trusts as inter vivos trusts is problematic and could lead
to difficult consequences.

Secret trusts are revocable. A testator could revoke a secret trust by executing another
will (thereby revoking the previous will) or a codicil to divert the gift from the
legatee. As a result, the property would not be vested in the legatee to hold on trust
and the secret trust fails for lack of constitution. 145 The diversion of property means
that the trust could not be carried out. Furthermore, due to a lack of constitution
during the testator's lifetime, secret trusts are ambulatory. They are imposed over
property that may no longer exist following the testator's death. 146 Despite any
assurances given by the testator, the trust property could be sold to another or claimed
by creditors if the testator dies in debt. Indeed, Penner correctly asserts that the
legatee's expectation to receive the property under the will is a 'mere hope or spes' .147

In conclusion, secret trusts could be testamentary dispositions. Through the use of

codicils or through the execution of new wills, they are revocable. Furthermore, their
effectiveness is contingent upon the trustee receiving the property. The legatee lacks
any interest in the trust property during the testator's lifetime. The interest arises when
the testator dies and the will transfers the property to him. Moreover, the will does not
restrict the testator's rights of ownership, therefore, during his lifetime he remains free
to sell or give away his property. Thus, this necessarily means that secret trusts are
ambulatory.

3.4 The problematiccase ofRe Gardner (No 2)148

Despite secret trusts being ambulatory and not inter vivos trusts, there have been
decisions by the courts that suggest otherwise. Re Gardner (No 2) held that the secret
beneficiary's interest could be passed onto her legal representative despite her
predeceasing the testatrix. 149 Usually, a gift by will lapses where the donee
predeceases the testator, 15 the gift normally falling into the testator's residue
estate. 15 1 The donee's estate can only claim the property if the donee had acquired
some interest in it before the testator's death, but no such interest existed in this
case.152 However, Romer J held that the gift did not lapse as the interest arose from
the trust that was created before the testatrix's death. 153 In His Lordship's view, the

144
Bairdv Baird [1990] 2 AC 548 (HL); ynior's Case (1609) 8 Co Rep 816, 77 ER 597.
145 Mark Pawlowski and James Brown, 'Constituting Secret Trusts by Estoppel' [2004] Conv 388, 391.
146
J E Penner, The Law of Trusts (8th edn, OUP 2012) 171.
14
7 ibid.
148 [1923] 2 Ch 230 (Ch).
149 ibid.
150 Hanbury & Martin (n 106) 174.
151Elliott v Davenport(1705) 1 P Wins 83, 24 ER 304.
152
Hanbury & Martin (n 106) 174.
153Re Gardner (No 2) (n 148) 233.
 NORTH EAST LAW REVIEW

testatrix's husband had effectively declared himself to be an immediate trustee of the

154
disputed property that would come to him through the testatrix's partial intestacy.
The trust was created inter vivos and its terms were indicated to him during her
lifetime. The will was a mechanism, which passed the property onto Mr Gardner,
thereby constituting the trust. Effectively, before the testatrix's death the trust had
existed as an incompletely constituted trust. An acceptance of decision in Re Gardner
(No 2)155 would mean that the trust is effective at the time that the trust was
communicated and agreed. However, this is contrary to the conclusions above.

It is submitted that the decision in Re Gardner (No 2) 156 was incorrect. Martin rightly
157
argues that there is 'no rational' theory that can justify the case's decision.
Additionally, Hayton correctly states that the earlier declaration of the trust in 1909
could not create a completely constituted trust because at the time the trust's subject
matter was a 'spes', merely future property. 158 Expectation or mere hope of the
property cannot form the subject matter of the trust. Therefore, the beneficiaries could
not have had any interest in the property until the testatrix's death in 1919.
Furthermore, for a person to declare himself or herself as a trustee of future property
there must be a further declaration or indication of this intention when the property is
transferred. 159 Following his wife's death, there was no evidence that Mr Gardner did
this. Whilst subsequent confirmation of a previous declaration would have been
sufficient to make Mr Gardner a trustee, 160 the initial previous declaration by itself,
was not. 161 Therefore, the legal representative of the predeceasing beneficiary should
not have acquired the interest.

It is therefore submitted that Romer J erred in his findings in this case. The secret trust
is not effective until the property is vested in the legatee thereby constituting the
trust. 162 Therefore, until the testator's death the secret trust confers no interest to
which the beneficiary or the beneficiary's estate can claim. Consequently, the
decision in Re Gardner (No 2)163 should be disregarded. Furthermore, due to the
decision's highlighted difficulties it is submitted that the case fails to be a convincing
case in supports of the Dehors theory. Thus, the argument that secret trusts are inter
vivos dispositions and beyond the scope of the Wills Act is incorrect and is therefore
an inappropriate basis in which to ground secret trusts.

154 ibid.
155 Gardner (n 148).
156 ibid.
157
Hanbury & Martin (n 106) 173.
158 David Hayton, Paul Matthews and Charles Mitchell, Underhill & Hayton, Law of Trusts and
Trustees
159
(18th edn, LexisNexis 2010) para 12.100.
Hodge (n 79) 348.
16°Re Northcliffe [1925] Ch651 (Ch).
161
Brennan v Morphett (1908) 6 CLR 22 (HCA).
162 Todd & Wilson (n 120) 238.
163 (n 148).
 KEEPING SECRETS

3.5 The Dehors theory's fatalflaw ,164

6 5 The theory confuses 'outside of the will' 166
The Dehors theory is 'fatally flawed'.
with 'outside of the Wills Act'.167 In order to justify secret trust's non-compliance
with section 9,168 it needs to be shown that secret trusts are outside of the Wills Act. 169
The theory fails to demonstrate this. It merely shows that due to the trust being
created during the testator's life time, this necessarily places it 'outside of the will'
and therefore, outside of the scope of the Wills Act. However, since the Wills Act
applies to all testamentary dispositions 170 and as concluded above it is likely that
secret trusts are testamentary dispositions, being merely 'outside of the will' is
17 1
insufficient as ajustificatory basis.

Critchley argues that the theory's flaw originated from the decision in Cullen v.
Attorney-Generalfor Northern Ireland.172 Here, Lord Westbury provided that where
there is a secret trust, the 'title of the party claiming under the secret trust ... is a title
Dehors the will' and that title 'cannot be correctly termed testamentary'. 17 3 However,
this is contrary to conclusions above and it is respectfully submitted that it is more
likely that secret trusts are testamentary. It appears here that his Lordship was
justifying secret trusts on the basis that they are 'outside of the will' rather than being
'outside of the Wills Act'. Furthermore, the decision in Cullen1 74 was made in relation
to the true interpretations of certain tax statutes, it did not concern the formalities of
due execution in section 9.175 Therefore, the readiness in this case to deny the
testamentary nature of secret trusts was in fact reasonable. Here, the judges held that
the gift made by the testatrix was not a 'gift by ... will or testamentary instrument'
within the meaning of the tax statutes. 176 Otherwise it would have meant that the
legatee have could avoided paying certain tax duties by claiming that the gift was
received by virtue of a testamentary disposition and therefore exempt from tax
duties. 177 Thus, Critchley correctly argues that the Dehors theory's mistake was to
apply the decision in Cullen, 178 which concerned the interpretation of testamentary
dispositions in tax statues to the different legal context of the Wills Act formalities. 179

16 4
Critchley (n 2) 641.
165 ibid.
166 ibid.
16
7 ibid.
168 Wills Act 1837.
169 ibid.
17 0
ibid s 1.
171 Critchley (n 42) 641.
172
ibid; (1866) LR 1 HL 190 (HL).
173 Cullen (n 172).
174 ibid.
175
Challinor (n 100) 495.
176
Cullen (n 172) 194.
177 ibid 199.
178 ibid.
179
Critcley (n 42) 641.
 NORTH EAST LAW REVIEW

Cullen18 ° was subsequently applied in Re Young. 181 It was held by Danckwerts J that a
182
secret trust is a trust that is created outside the will and imposed onto the legatee.
Consequently, the legatee in this case was unaffected by section 15 of the Wills Act
which provides that any gifts made in the will to an attesting witness shall be void."'
However, the legatee was able to take under the will despite having been a witness to
its execution. By coming to such a conclusion, Dankwerts J is effectively stating that
by virtue of being outside the will, secret trusts are outside the scope of the Wills Act.
However, in light of the discussion above, this assertion is incorrect. It would appear
that his Lordship failed to recognise that secret trusts are testamentary and disregarded
the applicability of section 1184 which provides that the Wills Act applies to all
testamentary dispositions. Otherwise he may have concluded that the beneficiary, by
witnessing the will, would have forfeited his gift under the will.

Therefore, it is respectfully submitted that the error made in Cullen185 should be

recognised and that the subsequent cases that applied it should be viewed with
caution. On this reasoning, it appears that the Dehorstheory is grounded on the notion
that secret trusts are merely 'outside of the will' and thus cannot act as a justification
for the informality of secret trusts.

In conclusion, the argument that secret trusts do not contravene parliamentary

legislation because they are inter vivos trusts that operate 'dehors' the will is flawed.
The theory fails on two crucial points. Firstly secret trusts cannot exist as an effective
inter vivos trust because the trust itself is not constituted until the testator's death.
Secondly, the theory incorrectly asserts that by being merely outside of the will the
trust is beyond the application of the Wills Act. Thus it is submitted that the Dehors
theory (based on the inter vivos argument) is an inadequate explanation to secret
trusts.

4 ALTERNATIVE THEORIES TO SECRET TRUSTS

In light of the inadequacies of the fraud and Dehors theories, this section assesses
alternative justifications for the enforcement of secret trusts despite their non-
compliance with section 9.186 This section argues that secret trusts are constructive
trusts that arise outside of the will on the basis of unconscionability and thus do not
contravene parliamentary legislation. Additionally, the suitability of the doctrine of
estoppel as a potential basis for secret trusts will be considered. Finally, the last part

180
Cullen (n 172)
181 [1951] Ch 344 (Ch).
182 ibid 350.
183 ibid 3 51.
184 Wills Act 1837.
185 Cullen (n 172).
186 Wills Act 1837.
 KEEPING SECRETS

of this section will assess Matthews argument that half secret trusts are enforced on
the same basis as incorporation by reference. 187

4.1 Secret trusts arise as constructive trusts on the basis of unconscionability

It is submitted that the basis for the enforcement of secret trusts is the combination of
the fraud and the Dehors theory. They are 'inexorably linked'. 188 Secret trusts arise
outside of the will and their enforcement is grounded on the basis of 'fraud'. The
premise of this argument is that in cases of 'fraud', the courts will be justified in
imposing a constructive trust that arises dehors the will. 189 Such an imposition would
effectuate the testator's wishes, even though they were expressed in a way that is
incompatible with the Wills Act.

However, a slight adjustment to this assertion is required. As correctly expressed by

Hudson, 'fraud' should be viewed as synonymous with 'unconscionability'.190 This is
in contrast to the narrow view of fraud that focuses on deceit and unjust
enrichment. 191 Here, fraud is interpreted so as to encompass all unconscionable
conduct. 192 Therefore, it would appear that in this context, secret trusts are enforced
because not enforcing them would lead to unconscionable outcomes. It could be
argued that the extended view of fraud is merely a part of 'unconscionability'. In
contrast to the orthodox view of fraud, the extended view focuses on ensuring that the
testator's wishes are not defeated and that the intended beneficiaries are not
defrauded. 193 There need not be any attempt by the legatee to resile from his promise,
nor is there a need for the behaviour to have already occurred. 194 Therefore, it appears
that the mere possibility of the legatee resiling from his promise is sufficient to invoke
this extended understanding of fraud. Critchley notes that the extended view of fraud
focuses on 'potential, rather than actual, wrongdoing ... the policy aim underlying [it]
is thus [preventative] rather than reactive (or curative)' .195 Thus, by the courts
extending the meaning of fraud to encompass unconscionable conduct, they are
attempting to ensure that the most 'conscionable' outcomes are reached and that
unconscionable conduct is prevented. 'Fraud', can therefore be understood as any
conduct or potential conduct that is 'simply against conscience'. 196

187
Paul Matthews, 'The true basis of the half-secret trust' [1979] Conv 360.
188 Allan (n 44) 342.
189 ibid.
19 0
Hudson (n 125) 342.
191
Hodge (n 79) 343.
192 Paul Davies, Graham Virgo, Maudsley and Burn's, Equity and Trusts, Text, Cases and
Materials
(7th
193 edn, OUP 2013) 132.
Oakley (n 63) 247.
19' Gardner (n 132) 96.
195 Critchley (n 42) 651.
196 ibid.
 NORTH EAST LAW REVIEW

4.2 The means by which secret trusts are enforced constructive trusts
There exists an academic debate as to whether secret trusts are express trusts or
constructive trusts. 197 This article argues that secret trusts are constructive trusts.
However, in order to fully assess the validity of this submission, the arguments
propounding secret trusts as express trusts will first be examined below.

Oakley argues that both forms of secret trusts are express trusts.198 In contrast to
Oakley however, Sheridan advocates a split view. He asserts that whilst fully secret
trusts are constructive trusts, half secret trusts are express trusts as they appear in the
will, the evidence of the trust being proof of the testator' s express intention to create
it. 199 Nevertheless, the premise of the argument that either type of secret trusts are
express trusts is that the testator had clearly intended to create a trust relationship
between the secret trustee and the secret beneficiary. Therefore, due to this clear
intention, secret trusts are express trusts. Moffat articulates that an express trust arises
as a result of the initial communication of the testator's intention to the trustee, his
acceptance and the subsequent constitution of the trust through the will. 20 0 Crucially,
it is the testator's express intention to create a trust that underlies the argument that
secret trusts are express trusts. Therefore, here, the courts are merely giving effect to
what the testator had originally sought to create, but whilst doing so, had neglected to
use the appropriate formalities. 20 1 Thus, secret trusts are express trusts that have been
saved from ineffectiveness through the disapplication section 9202 for reasons of
'fraud' 203 Underlying this is the maxim that equity will not allow a statute to be used
as an instrument of fraud. Such 'fraud' occurring if the intended express trust was
held to be ineffective upon vesting the property in the trustee, despite his promise to
hold the property on trust.

The difficulty with these assertions is twofold. The principal difficulty is that the
express trusts described above do not comply with the typical rules of express trusts.
Firstly, whilst the testator's communication of the secret trusts can be construed as a
declaration of his intention to create a trust, there is a failure to demonstrate any
conformity with the typical formalities required for express trusts. 20 4 For instance,
trusts of land are required to be evidenced in writing.20 5 Thus, if secret trusts were to
be express trusts then they would have to follow the section 9 formalities of the Wills
Act 20 6 or those under section 53 of the Law of Property Act 1925, but this is clearly

197 Scott-Hunt and Lim (n 11) 78.

198 Oakley (n 63).
199
200 L A Sheridan, 'English and Irish secret trusts' (1951) 11 LQR 314, 324.
Graham Moffat, Trust Law, Text and Materials (5th edn, CUP 2009) 155.
201
Paul Matthews, 'The words which are not there' in Charles Mitchell (ed), Constructive and
Resulting Trusts (Hart 2010) 21.
202 Wills Act 1837.
203 Gardner (n 132) 96.
204
Hudson (n 125) 322.
205
Law of Property Act 1925, s 53(1)(b).
206 Allan (n 44) 342.
 KEEPING SECRETS

207
not the case. Moreover, the core essence of secret trusts is that they are 'something
that operates in spite of the rules as to form'.2 °8 Since express trusts require the
fulfilment of certain formalities, the 'informal' nature of secret trusts makes it
difficult to declare them as such. This point is best articulated by Hudson who states
that, 'to analyse secret trusts as being express trusts appears to be a busted flush
0 9
precisely because no such formally validly express trust was actually created.' 2

Secondly, an express trust cannot exist when the testator had 'declared' his intentions
before his death because at this point the trust had not been constituted. Since no legal
title is vested in the trustee until the will is effective, it has been argued that what is
actually being declared is an executory trust. 2 1° Such a trust would take effect at a
designated point in the future, the testator's death. However, an executory trust
requires the execution of a further instrument that precisely defines what the
beneficial interests are. 211 From this instrument the courts need to be able to ascertain
both the trust and its terms. 212 Presumably, the basis of this argument is that the will is
the further instrument. Yet, these conditions are not fulfilled by the will in both fully
secret and half secret trusts. With fully secret trusts there is no evidence of the trust in
the will and whilst half secret trusts appear on the face of the will, its terms are
completely hidden. It could be argued that written communication to the legatee could
suffice as the further instrument. However, this would not explain cases where oral
communication of the secret trust is accepted. Thus secret trusts are not executory
trusts.

A final point is that the argument that express trusts operate post mortem and are
primafacie disallowed by the Wills Act but are saved from ineffectiveness through
the disapplication of section 9213 is difficult to reconcile with the principle of
parliamentary sovereignty.214 Underlying the legislation's disapplication is the maxim
that equity will not allow a statute to be used as an instrument of fraud. Whilst the
historical presence of this maxim is undeniable, Gardner questions the court's right in
deciding whether or not to apply an Act of Parliament on the basis of 'fraud'. 215 The
meaning of which appears to be of their own choosing and defining216 as
demonstrated by the term's extension to facilitate the acceptance of half secret trusts.
Critchley notes that just because as a matter of policy, the fraud maxim renders
justifiable the informal nature of secret trusts, it does not mean that it is

207
Ottaway v Norman (n 12).
208Robert Burgess, 'The juridical nature of secret trusts' (1972) 23 N Ir Legal Q 263.
209
Hudson (n 125) 322.
210 ibid.
211
Hanbury & Martin (n 106) 71.
212Re Flavel's Will Trusts [1966] 1 WLR 444 (Ch) 445, 447.
213 Wills Act 1837.
214 Simon Gardner, 'Reliance based constructive trusts', in Charles Mitchell (ed), Constructive and
Resulting Trusts (Hart 2010) 64.
215 ibid.
216 ibid.
 NORTH EAST LAW REVIEW

constitutionally justifiable for the courts to create an exception to a 'clear and

mandatory statutory provision'.217 By doing so, they are making a 'bald assertion' that
a testator's wishes should be respected, even when he has not implemented them in an
acceptable manner. 8 Indeed, Challinor argues that the 'very mild form of fraud' (the
extended view of fraud) which is utilised to justify equitable intervention does not
justify such an imposition in the same way that malus animus does in the orthodox
view of fraud. 219 Furthermore, it is unclear as to why in some cases the courts are
willing to overlook section 9, 220 but not the formalities 221 required for trusts of land
under the Law of Property Act 1925 (which requires that such trusts must be made in
writing). In Re Bailie, a secret trust of land was defeated by the courts because it
failed to comply with the predecessor to section 53(1)(b) of the Law of Property Act
1925, section 9 of the Statute of Frauds 1677.222

The difficulties addressed here are best resolved by appreciating that secret trusts are
constructive trusts. Rather than being express trusts that directly contravene statutory
provisions, it is submitted that such trusts are imposed by operation of law and thus
escape the Wills Act, because it does not apply to them. Constructive trusts, unlike
express trusts, are not dispositions and escape the requirements of formality under
section 53(2) Law of Property Act 1925. This would explain why the secret trust of
land in Ottaway v Norman was upheld despite its non-compliance with section
53(1)(b). 223 Gardner suggests that the fraud maxim is a metaphorical explanation for
what actually occurs via a constructive trust'.224 It could be argued that this is what
Viscount Sumner means in his statement that 'the whole topic is detached from the
enforcement of the Wills Act itself .225

It is concluded that secret trusts are constructive trusts. In contrast to express trusts
they do not arise to vindicate the testator's original intentions, rather they are imposed
by the court for other reasons.226 The reasons underlying their imposition will be
addressed below.

4.3 Constructive trusts are imposedfor reasons of unconscionability

Generally, where one holds property in situations where in equity and in good
conscience it should be held or enjoyed by another, one will be compelled to hold that
property on trust for that other.227 The statement's vagueness, however, has been

217
Critchley (n 42) 653.
218
Challinor (n 100) 497.
219 ibid.
220 Wills Act 1837.
221 ibid s 53(1).
222 (1886) 2 TLR 660 (Ch).
223 (n 12); Law of Property Act 1925.
224 Gardner (n 214) 65.
22 5
Blackwell (n 118) 340.
226 Gardner (n 132) 97.
227
Soar vAshwell [1893] 2 QB 390 (CA).
 KEEPING SECRETS

pragmatically developed by the courts when ascertaining the circumstances in which a

constructive trust arises. For example, in recipient liability, a constructive trust arises
when the recipient's knowledge of the circumstances surrounding the property makes
it unconscionable for them to retain the property. 228 It is submitted that
'unconscionability' also underlies the enforcement of secret trusts. Sheridan states
that secret trusts are but one illustration of the 'broad principle of constructive
trusts' .229 Thus, secret trusts are imposed as constructive trusts to prevent any
unconscionable actions of the trustee or otherwise unconscionable outcomes. 21° They
are imposed because it would be unconscionable for the property to be applied in any
other way.23 1 Thus, the courts attach a trust to the conscience of the trustee.232 As
submitted above, the 'fraud' that typically triggers the imposition of constructive
trusts 233 is synonymous with 'unconscionability'.

Whilst there is a lack of unequivocal authority for the assertions above, support may
be inferred from Viscount Sumner's judgment in Blackwel. 234 His Lordship provides
that a 'Court of Conscience' will not allow an individual who finds himself to be the
absolute legal owner of the property to exercise his legal rights where the property
was bequeathed to him upon certain motives and actions of the testator.235 His
Lordship further states that such actions by the courts are 'perfectly normal
exercise[s] of general equitable jurisdiction' and the facts commonly 'but not
necessarily' involve some immoral and selfish conduct by the holder of the legal
title. 236 It is submitted that what Viscount Sumner means is that the courts impose
constructive trusts to prevent the occurrence of 'fraud' but 'fraud' does not have to be
characterised by the trustee's wrongful conduct. Rather than trying to prevent
wrongful conduct, the courts are actually seeking to restrict any 'unconscionable'
outcomes that may arise if the property was applied in any other way other than what
was originally agreed.

Notably, 'unconscionability' is undefined by the courts and is left flexible so that it

can be used in a wide variety of circumstances. Hopkins correctly states that
'unconscionability does not exist as a concept at large' and Parkinson notes that the
'conscience of equity must not be given a life of its own, independent of specific
doctrines through which it finds expression'. 237 Therefore, what is considered

228 Bank of Creditand Commerce International(Overseas) LtdvAkindele [2001] Ch 437 (CA).

229 Sheridan (n 199) 324.
23 0
Hudson (n 125) 324.
231 Todd & Wilson (n 120) 241.
232
Blackwell (n 118) 355 (Viscount Sumner).
233 Hanbury & Martin (n 106) 74.
234 Blackwell (n 118).
235 ibid 334.
236 ibid.
237 Nicholas Hopkins, 'How should we respond to unconscionability? Unpacking the relationship
between conscience and constructive Trust' in Martin Dixon and Gerwyn LL H Griffiths (ed),
ContemporaryPerspectives on Property,Equity and Trusts Law (OUP 2007) 4; Patrick Parkinson,
 NORTH EAST LAW REVIEW

'unconscionable' conduct depends on the facts of each case. Problematically however,

this makes it difficult to predict when a constructive trust will arise to prevent
'unconscionable' conduct.

4.4 'Unconscionability' basedon the concept of lost opportunity

Hudson argues that the fraud theory is incorrect; rather he asserts that secret trusts are
enforced on the basis of the proprietary obligation accepted by the trustee. 21 Thus,
what equity is in fact trying to do is enforce this proprietary obligation, not prevent
the occurrence of 'fraud'. Hudson makes two points regarding this; firstly, the
proprietary obligation arises immediately on the testator's death.239 Secondly, the
obligation does not bind the trustee until the testator's death as before this he could
240
have altered his will so as to invalidate the secret trust.

Whilst Hudson's assertions that secret trusts are not enforced on the basis of fraud is
correct (it is founded upon unconscionability of which fraud forms a part), the
proclamation that the justification resides solely in a proprietary obligation is circular
and flawed. To assert that 'fraud' is not in any way a basis to the enforcement of
secret trusts is to overlook the fact that enforcement of the proprietary obligation is a
consequence of fraud. The proprietary obligation exists whether or not fraud occurs,
but the courts enforcement of it is triggered by the legatee fraudulently denying the
trust. Hudson's assertion, therefore, that secret trusts are 'institutional and not
remedial 24 1 is unsustainable.

Whilst Hudson's correctly recognises that secret trusts are enforced for reasons of
unconscionability, his claim that it is based upon the trustee's unconscionable
actions 242*is unsatisfactory as it leaves half secret trusts unaccounted for. He argues
that the principle underlying this is that equity will not allow the trustee to benefit
unconscionably from the testator's bequest and thus 'controlling the conscience of the
trustee is key' in both forms of secret trusts. 243 However, it is difficult to see how the
trustee of a half secret trust could benefit as by the trust appearing on the will, the
trustee would not be able to retain the property beneficially. Thus, whilst Hudson
correctly identifies unconscionability as a basis for secret trusts, he utilises it in a way
that fails to adequately account for both fully secret and half secret trusts.

'The Conscience of Equity' in Patrick Parkinson (ed), The Principlesof Equity (2nd edn, Lawbook Co
2003)
23 8
29.
Hudson (n 125) 321.
239 ibid.
240 ibid.
241 ibid.
242 ibid 324.
243 ibid 325.
 KEEPING SECRETS

A preferable explanation is Gardner's suggestion that the unconscionable outcome

that the courts are trying to prevent is that of 'lost opportunity' .244 Gardner argues that
where one transfers property to another on reliance that the other will hold the
property on trust, and there exists an ability to resile from the promise, the transferor
245
of the property suffers a detriment.. The detriment is the loss of opportunity to
achieve one's objective through other means. 246 In secret trusts, the 'lost
opportunity' 247 in which the testator suffers is the loss of alternative methods in which
to provide for the beneficiary. Therefore, the imposition of the constructive trust to
248
effectuate the secret trust is a way in which to correct the testator's reliance loss.
Gardner argues that the constructive trust arises as soon as the testator, having forgone
his opportunity to make other arrangements on the faith of the trustee's undertaking,
makes the necessary legacy to the trustee and the property reaches the trustee's
hands. 249 The constructive trust operates to rectify the loss of opportunity that the
testator suffers on reliance of the trustee's undertaking. It is for this reason that secret
trusts are enforced and that the legatee is held to the undertaking that he agreed to
carry out.

The advantage of the theory of lost opportunity is that it can also be applied to half
secret trusts. This is because the testator still relies on the legatee's undertaking and as
a result the testator still loses his opportunity to achieve the trust through other
means. 25 Therefore to ensure that the testator's wishes are carried out and in order to
remedy the loss of opportunity, the secret trust is enforced. However, it is noted that
whilst this is the most justifiable basis of secret trusts, there is a lack of support for it
in the case law. Thus, whilst the argument itself is strong, it unlikely to be what the
courts are really advocating when enforcing secret trusts.

4.5 Estoppel
A potential basis for secret trusts could be found in the doctrine of estoppel.
Following on from Gardner's assertion that secret trusts are enforced in order to
rectify reliance loss, it could be argued that there are similarities between equitable
estoppel and secret trusts. Estoppel requires the making of a representation that
promises a benefit and then in reliance to this, the claimant acts to his detriment.251
Estoppel prevents the claimant's detriment from going uncompensated.252 Similarly,

244 Gardner (n 214) 66.

245 Gardner (n 132) 97.
246 ibid.
247 Gardner (n 214) 66.
248 ibid.
249 ibid 67.
250 ibid 66.
251 Taylor FashionsLtd v Liverpool Victoria Trustees Co Ltd [1982] 1 QB 133 (Ch); Re Basham
(Deceased) [1986] 1 WLR 1498 (Ch); Wayling v Jones (1993) 69 P & CR 170 (CA); Gillettv Holt
[2001] Ch2l10 (CA).
252Hudson (n 125) 326.
 NORTH EAST LAW REVIEW

in light of Gardner's 'loss of opportunity' argument secret trusts are enforced to

ensure that the testator's detriment does not remain outstanding.

Furthermore, underlying both doctrines is the concept of conscionability. In reference

to proprietary estoppel, Lord Evershed states that it aims to 'not so much as to do
justice as to restrain injustice, i.e. to stop the unconscionable conduct of the person
against whom equity proceeded'.253 This could be applied to secret trusts. In light of
Gardner's theory, it could be argued that secret trusts are enforced to restrain
'injustices' that would occur if the agreement was defeated. Such 'injustices' would
be the detriment that the testator suffers through his reliance loss.

The doctrine of estoppel can be split into promissory estoppel and proprietary
estoppel.254 The key distinction between these two is that the latter has the ability to
create new proprietary rights whilst the former merely protects the claimant's existing
rights.255 In proprietary estoppel the claimant is required to show that there has been a
representation or assurance by the defendant that the claimant relied upon to his/her
detriment..256 In Re Basham Edward Nugee QC explains that the claimant is required
to act to his detriment upon a belief that is 'known and encouraged by another' .257
Subsequently, the party encouraging the belief cannot then insist upon their strict
legal rights if it would be unconscionable for him to do so. It was also stated that the
machinery by which proprietary rights are given through estoppel is 'similar ... to
those involved in cases of secret trusts ... in which property is vested in B on the faith
and understanding that it will be dealt with in a particular manner' .258 It is the
claimant's alteration of his position on the faith of the representation that gives rise to
the doctrine. However, the claimant's detriment in proprietary estoppel, whilst based
on unconscionable behaviour 259 and cannot be regarded as a 'narrow or technical
concept', 260 must be a substantial.261 Whilst the case law demonstrates that such
detriment need not be fiscal,262 it appears that it would need to be shown that the
testator had acted beyond that of merely setting up the appropriate legacy for the
trustee.

It is submitted that secret trusts could be better enforced through promissory estoppel.
This operates where one makes to another an unambiguous representation as to their
future conduct and the other then alters their position in reliance upon the

253 Lord Evershed, 'Reflections on the Fusion of Law and Equity after Seventy Five Years' (1954) 70
LQR 326, 329.
254 Hanbury & Martin (n 106) 941.
255 ibid 941.
256 Cases cited in (n 251).
257
Basham (n 251) 1504.
258 ibid.
259 Gillett (n 251).
260 Van Laetham v Brooker [2005] EWHC 1478 [74] (Lawrence Collins J).
26
1Hudson (n 125) 601.
262
Pascoe v Turner [1979] 1 WLR 431 (CA).
 KEEPING SECRETS

representation. 263 The party making the representation will be unable to act
264
inconsistently with the representation if it prejudices the other party. Because there
is no creation of new rights in promissory estoppel, the detriment required is less
stringent. Here, the claimant need only show that they had committed themselves to a
particular course of action as a result of the representation. 2656 It could be argued that
as a result of the trustee's representation the testator's provisions to create a legacy in
favour of the trustee shows that they have committed themselves to a particular course
of action. Additionally, in doing so, they also forego other opportunities to benefit the
beneficiary.

However, there is a fatal difficulty in attempting to integrate secret trusts with the
doctrine of estoppel. Unlike cases of estoppel, secret trusts necessarily involve three
rather than two parties, the testator, the secret trustee and the secret beneficiary. This
point was raised by Walker LJ in Gillett v Holt.266 In secret trusts it is the agreement
between the testator and the trustee, not the beneficiary's moral claim that makes it
unconscionable for the trustee to deviate from the agreement. The basis of the
enforcement of secret trusts is founded on unconscionability upon the testator, and it
is the testator who suffers the detriment. Therefore, it is difficult to perceive how the
claimant could rationally claim against the trustee on the testator's detriment.
Consequently, unless the personal representative or the executor of the testator could
invoke the doctrine of estoppel on behalf of the testator, the theory that the basis of
secret trusts can be found in the doctrine of estoppel is unmaintainable.

4.6 Incorporationby reference

Matthews argues that due to the similarities between half secret trusts and
incorporation by reference, half secret trusts are enforced on the same basis as the
267
latter. However, this position is ultimately flawed because the suggested similarities
are superficial 26 8 and do not outweigh the overwhelming distinctions between the two
doctrines. Thus, ultimately the argument is unconvincing. Furthermore, to assert
incorporation by reference as the true basis of half secret trusts overlooks the means
by which such trusts arise. Nevertheless, the similarities first will be addressed.

At the most basic level, both half secret trusts and incorporation by reference require a
validly executed will. 269 Both require some reference in the will as to the informal
arrangement. Whilst a fully secret trust can arise in intestacy270 a half secret trust by

263 CentralLondon PropertyLtd v High Trees House Ltd [1947] KB 130 (KB).
264
Combe v Combe [1951] 2 KB 215 (CA) 220.
265
High Trees (n 263); WJAlan & Co Ltd v El Nasr Export and Import Co [1972] 2 QB 189 (QB);
Ajayi vRTBriscoe (Nigeria)Ltd [1964] 1 WLR 1326 (PC).
266 Gillett (n 251) 228.
267
Paul Matthews, 'The true basis of the half-secret trust' [1979] Cony 360.
26 8
Hanbury & Martin (n 106) 157.
269 Critchley (n 42).
27 0
Sellack v Harris(1708) 2 Eq Ca Ab 46 (Virginia CA).
 NORTH EAST LAW REVIEW

definition requires an effective will. Secondly,271 the rule in half secret trusts
regarding the time of communication of the trust before the date of the will 272 is the
273
same as the time in which material is to be incorporated by reference into the will.

However, in spite of these similarities there are several key differences that ultimately
suggest that half secret trusts and incorporation by reference should be viewed as two
separate doctrines. 274 Firstly, in half secret trusts, the testator's wishes can be made
orally. However, in cases of incorporation by reference, additional terms or
amendments have to be made in a written document. Problematically, in order to
assimilate the two doctrines, it would be necessary to either insist that half secret
trusts communicated orally should fail or incorporation by reference has to be
extended to include oral communications.

Secondly, in order for a document to be incorporated into a will the words used must
not be so vague that it is incapable of being applied to a particular document. Thus,
incorporation by reference requires a higher level of specificity in order to be
successful.275 In contrast, in half secret trusts the mode of communication employed
need not be specified and the inclusion of the word 'trust' on the will is sufficient to
turn a fully secret trust into a half secret trust.

Finally, there is no requirement of communication of the intention to create the trust

from the testator and the acceptance by the legatee in incorporation by reference. In
fact it should be noted that there is no role for the legatee at all in incorporation by
reference. However, these elements are essential to the creation of secret trusts.
Therefore, the argument that half secret trusts are enforced on the same basis as
incorporation by reference overlooks the very nature in which secret trusts arise. In
conclusion, in light of the above the justification for half secret trusts cannot be found
in the doctrine of incorporation by reference.

As illustrated above, the argument that secret trusts are express trusts that are saved
from ineffectiveness is flawed as secret trusts fail to comply with the formalities of
express trusts. Additionally, for the reasons already discussed, the doctrine of estoppel
and incorporation by reference are inadequate basis in which to justify secret trusts.
Therefore, Gardner's position that secret trusts are enforced as constructive trusts that
arise as a result of the testator's 'loss of opportunity' is the most justifiable
rationalisation to the courts enforcement of such trusts.

271
Matthews (n 187) 361.
272
Re Keen [1937] Ch 236 (CA).
273
Re Jones [1942] Ch 328 (Ch).
274 Critchley (n 42).
275 ibid 644.
 KEEPING SECRETS

5 CONCLUSION
As concluded earlier, individually the fraud theory and the Dehors theory are
inadequate explanations to the enforcement of secret trusts. Whilst the former in its
orthodox form satisfactorily explains the court's implementation of fully secret trusts,
it cannot justify half secret trusts. Additionally, the extended definition of fraud based
on fraud upon the testator's promise and harm upon the interests of the secret
beneficiaries2 76 does not possess the robustness required to support secret trusts.
Furthermore, the Dehors theory based on the assertion that secret trusts are inter vivos
trusts and are therefore beyond the Wills Act is flawed. It confuses being 'outside of
the will' with being 'outside of the Wills Act' 27. 7 It wrongly asserts that since secret
trusts are inter vivos trusts they are beyond the will and therefore beyond the scope of
the Wills Act. Furthermore the assertion that the trust is created during the testator's
lifetime but constituted after death 27 8 is incorrect. Therefore, the Dehors theory as
postulated by Perrins2 7 9 is flawed and thus cannot operate as a basis for the
enforcement of secret trusts.

Therefore, this article concludes that the minority position that the enforcement of
secret trusts is based upon the imposition of a constructive trust is the preferable view.
Underlying this is the understanding that the Fraud and Dehors theory are
complementary rather than competitive rationalisations. 280 It is the occurrence of
'fraud' that triggers equity's imposition of a constructive trust to effectuate a secret
trust. However, 'fraud' in this context is better understood as 'unconscionability'.
Furthermore, it is submitted that the constructive trust that is imposed to effectuate the
secret trust can most justifiably be explained by Gardner's concept of 'lost
opportunity' . As stated previously, this is the argument that secret trusts are
,282

enforced in order to remedy the 'harm' suffered by the testator. The 'harm' is the
testator's 'loss of opportunity' to make alternative arrangements to benefit the secret
beneficiary due to his reliance on the legatee's promise to act as a trustee. 283 The
advantage of this argument is that it overcomes difficulties in defining and applying
'unconscionability' as a criterion to when secret trusts should be enforced. Whilst
unconscionability may underlie the court's actions in rectifying the testator's loss, it is
more straightforward for the courts to apply the concept of 'lost opportunities' than to
define what circumstances are 'unconscionable'. However, it is noted that Gardner's
concept could also be dangerously extended to cover situations beyond secret trusts.
For example it could be applied in a situation where a testator who is not making a

276
Oakley (n 63) 247.
277 Critchley (n 42) 641.
27 8
Perrins (n 110) 250.
279 ibid.
280 Allan (n 42) 342.
281 Hudson (n 125) 342.
282 Gardner (n 214) 66.
283 ibid.
 NORTH EAST LAW REVIEW

secret trust fails to comply with section 9284 when creating a will. Arguably, here the
testator has also lost his opportunity to benefit his beneficiaries through other
arrangements as typically, any discoveries of non-compliance with statutory
formalities are found after the testator's death. Therefore, it is submitted that
Gardner's argument should be confined to secret trusts in order to prevent testators
2
from using it to as a mechanism to generally overcome section 9. 11

However, the submission that Gardner's position is the preferable view is cautiously
made. Whilst the argument is robust, there is a lack of clear support for it in the case
law. Thus it could be argued that despite the rationalisation's strength, this is not what
the courts are actually advocating when enforcing secret trusts. Indeed, Kandasamy
argues that it does not matter what theory is used to explain secret trusts. 2 86 Their
enforcement is in fact a policy decision by the judiciary to fulfil the wishes of the
testator. 287 Therefore, it does not matter in a 'practical sense' what theory is used to
explain secret trusts. 288 However, this assertion goes too far. Since secret trusts appear
to operate in the face of parliamentary legislation it is important to identify the court's
reasoning for enforcing such trusts. By itself, the argument that the courts are
disapplying statutory provisions just to ensure that the testator's wishes are not
defeated is an insufficient reason for the disapplication of legislation.

Like Gardner, Waters argues that English courts enforce secret trusts because they
'have always been anxious to enforce the promise which the recipient made or led the
transferor to believe that he had made' .289 Thus, secret trust enforcement is due to the
courts' reluctance to defeat a promise that the testator has relied upon. However,
unlike Gardner, Waters submits that the rationalisation that secret trusts are
constructive trusts is made post hoc. 290 The trust is labelled 'constructive' due to the
courts' consistent highlighting that fraud would occur if oral evidence of the trust
could not be introduced. 291 Despite fraud being the original basis for the enforcement
of secret trusts, he argues that it is now a 'smoke screen' to the reality that they are
enforced to maintain the trustee's promises which the testator relied upon.292

However, simply enforcing secret trusts to ensure that the testator's wishes are
effectuated is an insufficient justification on its own to an apparent circumvention of
statutory provisions. Thus, it is submitted that perhaps the courts enforce secret trusts
in order to deal with a testator's genuine need for secrecy. Watkin regards this as the

284 Wills Act 1837.

285 ibid.
286 Kandasamy (n 5).
287 ibid.
288 ibid.
289
D W M Waters, The constructive trust, the casefor a new approach in English law (Athone Press
1964) 58.
70.
291 ibid
29 1
ibid 60.
292 ibid.
 KEEPING SECRETS

'problem of secrecy' that arises as a result of the public nature of the will once it is
admitted to probate.29 3 He states that secret trusts are enforced because the 'testator's
desire for secrecy was as much indulgeable as the need for evidence concerning
2 94
testamentary disposition' . Support for this assertion can also be found in the case
law. In Blackwell Viscount Sumner in addressing the motives for creating secret trusts
states that, 'A desire for secrecy is a legitimate motive for setting up a semi-secret
trust' 29
. 5 However, not all secret trusts are created for secrecy; some testators' make
secret trusts in order to allow for flexible modification to his/her testamentary wishes
296
without having to alter the will.

However, Watkins argues that a desire for flexibility should not be indulged.2 9 7 To do
so would effectively allow testators to evade statutory provisions by using secret
trusts to accommodate frequent changes of mind. The policy behind the Wills Act
formalities, Watkin contends, should not be 'sacrificed on the altar of secrecy for the
benefit of persons who have no interest in secrecy'. 2 98 In fact, following his earlier
statement regarding the legitimacy of the desire for secrecy, Viscount Sumner goes on
to assert that 'a desire for ... flexibility is not a motive which the law should
indulge' .299 Therefore, it is clear that unlike the desire for secrecy, the courts do not
enforce secret trusts in order to indulge a desire to be able to flexibly implement one's
testamentary wishes.

However it is submitted that the motives for the creation of secret trusts are irrelevant.
Such motivations are seldom mentioned or considered the central focus in secret trust
cases. Instead, it is submitted that the most justifiable explanation to the courts'
enforcement of secret trusts is based on the fatal nature of the 'loss of opportunity'
suffered by the testator. Since this 'harm' follows death, the testator is inevitably
unable to make alternative arrangements to effectuate his wishes. Since the testator's
executors are not in a position to create trusts on the testator's behalf to remedy this,
the court is consequently the only remaining body that is able to remedy this 'harm'.
It is for this reason that the courts compel the secret trustee to carry out the secret
trust. It is the fatal nature of this loss of opportunity that distinguishes the situation
between the ineffective trust of a settlor and the ineffective secret trust of a testator.
The former is potentially able to make alternative arrangements to benefit the
beneficiaries, whereas it is impossible for the latter to do the same.

In conclusion for the reasons discussed above, the enforcement of secret trusts is most
justifiably explained by the fatal nature of the 'loss of opportunity' suffered by the

293 Thomas Glyn Watkin, 'Cloaking a contravention' [1981] Conv 335, 337.
294 ibid.
295
Blackwell (n 118) 339 (Viscount Sumner).
296 Rowena Meager, 'Secret Trusts - do they have a future?' [2003] Cony 203, 207.
297
Watkin (n 293) 399.
298 ibid.
299
Blackwell (n 118) 339 (Viscount Sumner).
 NORTH EAST LAW REVIEW 105

testator. This loss occurs as a result of the testator's reliance on the legatee's promise
to hold the property on trust for the secret beneficiary. The courts then enforce this
promise through the imposition of a constructive trust thereby effectuating the secret
trust.