Reconceptualizing the fully-secret trust

Trusts & Trustees (2015) 21 (7): 802

1 September 2015

Trusts and Trustees > 2015 - Volume 21 > Issue 7, 1 September > Articles

Trusts and Trustees

Stewart Manley

was a Specialist at the Faculty of Law, Multimedia University, Melaka, Malaysia. E-mail: smanley5@gmail.com.
© Oxford University Press 2015

Abstract: In reconceptualizing the fully-secret trust, this article attempts to resolve a number of long-standing
disagreements, such as why secret trusts are enforced despite non-compliance with the Wills Act, and whether
fully-secret trusts are inter vivos or testamentary. It also briefly addresses broader theoretical questions about trust
law, such as whether a transfer can simultaneously be both a gift and on trust and whether the identity of a settlor is
determined by intention or ownership. I propose that, contrary to conventional theories, the settlor of a fully-secret
trust is not the testator, but the secret trustee; and the fully-secret trust is constituted not upon the testator's death
but later, at the time that the secret trustee receives the trust property from the executor of the testator's estate.
Private Client

Introduction

Secret trusts are scrutinized in every trust law textbook. Numerous scholarly articles have debated their theoretical
basis. Yet they remain a conceptual conundrum. Is a fully-secret trust testamentary or inter vivos? Is it express or
constructive? Should its apparent failure to comply with the requirements of the Wills Act be disregarded to prevent
fraud or because it is dehors (outside the scope of) the will?1 Additionally, a number of practical problems inherent
in fully-secret trusts—what happens if the secret trustee disclaims, if the secret trustee or beneficiary predeceases
the testator, or if the secret trustee or beneficiary attests the will—persist and have led to ostensibly incompatible
judicial decisions.2

This article submits that some, but not all, of the aforementioned issues can be resolved by reconceptualizing the
fully-secret trust. Recall that a fully-secret trust is used to hide the true recipient of a testamentary disposition. The
disposition appears to be going to one person, but in reality it is held for another. Thus, for instance, if X wishes to
secretly give his house to Z, he will make an outright gift in his will, but not to Z. Instead, his will may provide, 'My
house to Y.' X then discreetly requests Y to hold the house for his secret beneficiary, Z. So long as Y does not
reveal the secret, no one except Y and Z will ever know that X wanted Z to have the house.

Conventional theories identify the testator (in our example, X) as settlor and the moment of constitution3 of the trust
as the time of the testator's death. The primary problem with these theories is that they are not consistent with the
proper distribution of the testator's estate. Returning to our example, upon X's death, his executor must distribute
the house strictly in accordance with the terms of the will. This means distribution as a gift to Y (as a donee, not a
 Reconceptualizing the fully-secret trust

trustee). Traditional theories do not satisfactorily accommodate this requirement because the constitution—ie the
vesting of title in a trustee—occurs under these theories at the time of X's death. It is not possible, under these
theories, for the executor to distribute the property as a gift, as expressly required by the will. Moreover, distribution
as trust property

Trusts & Trustees (2015) 21 (7): 802 at 803

would require the executor to know of the secret (which often is not the case), and additionally would jeopardize the
secret because the other beneficiaries would, through an accounting of the estate, come to know that the property
was distributed in trust.

Two conceptual adjustments can resolve this problem. First, the secret trustee, rather than the testator, should be
considered the settlor of the trust. Second, upon the testator's death, the property is distributed consistent with the
terms of the will to the secret trustee as an outright gift. Upon receipt of the gift by the secret trustee, by a
mechanism explored in detail below, the secret trust is constituted. These conceptual adjustments—herein called
the 'post-death trust theory' because the constitution occurs neither before nor upon the testator's death, but some
time after it—resolve one of the most vexing problems of fully-secret trusts: why they are enforced despite their
failure to comply with the writing and attestation requirements of the Wills Act. Under the post-death trust theory,
fully-secret trusts are not testamentary dispositions—and thus do not need to comply with the Wills Act—because
the secret trustee, rather than the testator, is the settlor of the trust. As the secret trustee (who is also the settlor) is
not dead at the time the trust becomes constituted and irrevocable, the secret trust is not a testamentary
disposition.

Basic concepts and traditional theories

Secret trusts are used because wills, once they are submitted for probate, become public documents subject to the
prying eyes of others. A testator, for one reason or another, may want to keep secret the identity of a person
receiving a testamentary gift. To do so, she can create a secret trust. Secret trusts come in two types: fully-secret
trusts and half-secret trusts. To create a fully-secret trust, a testator provides what appears to be an outright gift in
his or her will. The testator communicates to the donee of the bequest that the property should actually not be kept
by the donee, but instead should be held for or given to a third party, the secret beneficiary. If the donee agrees, a
fully-secret trust has been created. To illustrate, a will referring to a fully-secret trust could provide, 'My stock in XYZ
company to T', where T appears to be the recipient of a gift but would actually be the trustee.

With a half-secret trust, the existence of the trust and the identity of the trustee are described in the will, but the
identity of the beneficiary is omitted. Thus it is 'half' secret. A half-secret trust could provide, 'My stock in XYZ
company to be held on trust by T as I have communicated to him'. Upon seeing the provision for a fully-secret trust,
a reader of the will would have no inkling that the stock is to be held on trust, whereas a person seeing the half-
secret trust would know that the stock is to be held on trust and who the trustee is, but would not know the identity
of the secret beneficiary.

Secret trusts were traditionally thought to be used by men who wished to discreetly support mistresses and children
born out of wedlock or to conceal charitable gifts of land when they were prohibited.4 They are also used, however,
for tax savings or, in the case of fully-secret trusts, to be able to change the beneficiary after the execution of the
will.5 The problem that courts encountered was that the Wills Act requires all testamentary dispositions be in writing,
signed, and witnessed.6 By secretly giving the information about the trust to the intended trustee, often orally and
never with attesting witnesses, the testator was not complying with these requirements. Secret trustees who elected
to break their promises and keep the property for themselves could then use the failure to comply with the Wills Act
as a reason for courts to refuse to enforce the trusts.

The enforcement of secret trusts, despite their ostensible infringement of the Wills Act, was originally

Trusts & Trustees (2015) 21 (7): 802 at 804

 Reconceptualizing the fully-secret trust

justified to prevent fraud.7 Under this 'fraud theory', courts disregarded non-compliance with the statutes to prevent
trustees from inducing testators to give the property by secret trust and then, once the testator has died, invoking
the statute to invalidate the trust and retain the property.8 Lord Westbury of the House of Lords articulated the fraud
theory as follows:
The Court of Equity has, from a very early period, decided that even an Act of Parliament shall not be used as an
instrument of fraud; and if in the machinery of perpetrating a fraud an Act of Parliament intervenes, the Court of Equity,
it is true, does not set aside the Act of Parliament, but it fastens on the individual who gets a title under that Act, and
imposes upon him a personal obligation, because he applies the Act as an instrument for accomplishing a fraud.9
Yet the fraud theory was incomplete and a number of objections were raised against it. For instance, fraud is not
always involved, such as when an honest trustee seeks the court's advice on the existence of the trust.10
Additionally, a constructive trust (ie one inferred by the court that obligates the intended trustee to hold the property
in trust) may arise even when there is no fraudulent inducement at the time of the communication.11 The fraud
theory also fails to adequately justify the enforcement of half-secret trusts, where there is little risk of fraud because
the trust's existence is made known in the will.12 C E F Rickett argues that the real justification for enforcing secret
trusts is to carry out the intentions of the testator, not to prevent fraud, and that the fraud theory 'stemmed from a
time when …unconscionable behaviour was likely to be punished without too much concern for the legal logic'.13

The theory that is more widely accepted today is that secret trusts need not comply with the requirement of the Wills
Act because they are made outside and independently of the will.14 This 'dehors the will' theory provides that the
secret trust is not created by the will, but rather arises from the independent obligation accepted by the trustee. Lord
Westbury explained in Cullen v Attorney General for Ireland that:
where there is a secret trust …the title of the party claiming under the secret trust …is a title dehors the will, which
cannot be correctly termed testamentary.15
Yet, this theory has also been criticized. Patricia Critchley argues, for instance, that while secret trusts may be
testamentary dispositions outside the will, they are not outside the Wills Act because they remain testamentary
dispositions.16 The dehors theory also fails to justify the enforcement of secret trusts of land despite their non-
compliance with the writing requirement of sub-section 53(1)(b) of the Law of Property Act 1925.17 Moreover, there
has been little agreement under this theory on whether the secret trust, particularly the fully-secret trust, is express
or constructive.18

Trusts & Trustees (2015) 21 (7): 802 at 805

Academicians generally agree that neither of these theories is satisfactory.19

The fully-secret trust as a post-death trust

Constitution of the trust and vesting of the beneficial interests

This article submits that—contrary to what academics universally conclude20—the fully-secret trust is constituted
and the equitable interest vests in the secret beneficiary at the time the property is distributed to the secret trustee.
This moment is neither during the testator's life nor upon death, but 'post-death'. Even the dehors theory recognizes
that the death of the testator is an important link—a triggering point—between the will and the constitution of the
trust.21 Under the theory introduced in this article, the link is severed; not only is the fully-secret trust declared
outside the will—unlike in the dehors theory, it is also constituted outside and without connection to the will.22 The
outright gift expressed in the will, rather than the secret trust, is the true testamentary disposition. It does not
infringe the safeguards of the Wills Act because, as part of the will, it is in writing and presumably has been signed
and witnessed. Some of the difficulty that academics have encountered in determining whether a fully-secret trust is
express or constructive is caused by the trust's failure to comply with the formalities of the Wills Act.23 Under the
post-death trust theory, the fully-secret trust does not infringe the Wills Act and thus may be considered a valid
express trust.
 Reconceptualizing the fully-secret trust

What makes a fully-secret trust different from other trusts is that it is a deception. Executors of wills that contain
fully-secret trusts (and the general public, since wills become public documents) believe that the property to be
conveyed is an outright gift when it is really a gift subject to the condition that it be held in trust. This article submits
that the executor trans-fers—and must transfer—the subject matter of a secret trust as an outright gift to the secret
trustee. This proposition becomes evident when the mechanism of distribution is examined. To illustrate, if the
provision in the will that references a secret trust provides, 'My car to my brother Y', where Y is the secret trustee,
the executor will transfer the car to 'Y', and not to 'Y as Trustee'.24 For many (or perhaps most) fully-secret trusts,
the executor will not know that what appears to be a gift is actually—at least according to conventional theory—not
a gift. Yet even if an executor knew of the intention to create a secret trust, or came to know of it after appointment,
he or she would still be obligated to effect the transfer in strict accordance with the terms of the will.25 To do
otherwise would be a violation of executor duties and outside the scope of the executor's limited rights to manage
the testator's property. The executor further would not be able to submit evidence of the secret trust in his
defence.26 Additionally and more practically, to transfer the property on trust would defeat the testator's original
wishes by exposing the secret because executors must be able to account to the beneficiaries for all distributions.27
In an accounting, beneficiaries would see that, contrary to the terms of the will, property had been distributed in
trust.

Trusts & Trustees (2015) 21 (7): 802 at 806

An analysis of the secret beneficiary's ability to claim the property at different stages of the secret trust illustrates
this proposition. Where a trustee of a fully-secret trust predeceases the settlor, courts and legal scholars generally
agree that the gift fails and the trust will not be enforced.28 After all, the apparent beneficiary of a gift has
predeceased the testator, triggering lapse (provided that the testator has not anticipated and provided for this
possibility and no anti-lapse statute applies). The executor will not distribute the secret trust property to the secret
trustee's heirs or to the secret trust beneficiary, but instead to the testator's heirs (provided that the testator has not
amended the will in the interim). In the eyes of an executor, the matter is a simple one: a beneficiary of a bequest
has predeceased the testator. The outcome would be different, however, if the trustee dies between the time of the
testator's death and the time of the transfer of the secret trust property to the trustee. The executor would then
distribute the property to the secret trustee's heirs29—but importantly, not to the secret beneficiary. In the executor's
eyes, the secret trustee appears to be a beneficiary of a gift who has died after the testator. It would only be upon
the distribution to a live secret trustee that a secret beneficiary's interest would vest because, prior to that moment,
the trust has not been fully constituted and is thus unenforceable by a volunteer.30 Accordingly, a fully-secret trust is
best thought of as being constituted some time after, not upon, the testator's death.

At this point it is worth addressing the view, probably most eloquently argued by Patricia Critchley, that a fully-secret
trust is a testamentary disposition.31 Using the definition of a will as a starting point to determine the essential
elements of a testamentary disposition, Critchley provides that a will is 'a disposition of property …to take effect
after [the testator's] decease, and which in its own nature is ambulatory and revocable during his life'.32 A provision
in a will, for instance, is clearly a testamentary disposition because (i) it takes effect after the testator's death, (ii) it
is ambulatory (meaning that it remains indefinite and ineffective until death) and (iii) it is revocable (meaning the
testator can change it). Critchley concludes that a fully-secret trust is both ambulatory and revocable. In responding
to the argument that a fully-secret trust is not revocable by the testator, she reasons that even if a testator could not
revoke a secret trust directly, he could 'definitely achieve the same effect by revoking the will on which the secret
trust arrangement depends, or by making a will to divert property which would otherwise come to the secret trustee
on intestacy'.33 Critchley adds that the secret trustee's ability to revoke the trust is arguably irrelevant because it is
the testator, not the trustee, making the disposition.34

Under the post-death trust theory, however, the secret trustee is the one making the disposition at issue. Viewed in
this light, the secret trust cannot be a testamentary disposition because it becomes effective before, not after, the
secret trustee's demise (provided, of course, that the secret trustee did not agree to hold the property until her
death). Furthermore, the testator would not be able to revoke the trust because it is only in the trustee's power, as
 Reconceptualizing the fully-secret trust

declarant, to do so. While it is true that the testator could do so indirectly by amending the will, this ability surely
does not transform a non-testamentary disposition into a testamentary one. Rather, it merely means that the
testator has the ability to defeat a non-testamentary disposition. The will is a testamentary disposition—the bequest
contained in the will (and the entire will itself) is revocable by the testator—but the trust declared over the bequest
by the trustee is neither. A more

Trusts & Trustees (2015) 21 (7): 802 at 807

appropriate characterization of a fully-secret trust would be an inter vivos35 disposition but, contrary to traditional
conceptions, inter vivos of the secret trustee rather than of the testator.

The idea that the subject matter of a fully-secret trust is a gift is not new. Legal scholars have characterized it as a
gift subject to a personal obligation to hold it in trust.36 Lord Hatherley in McCormick v Grogan observed that the
secret trustee 'apparently may be held in law to take the whole interest' with the obligation to hold it in trust
'fastened upon his conscience.'37 Lord Buckmaster in Blackwell v Blackwell called it a 'fiduciary gift.'38 These
characterizations are not inconsistent with the post-death trust theory but do not address the timing of the vesting of
beneficial interests and the changed identity of the settlor. Under the post-death trust theory, the transfer to the
trustee is of the whole interest, but as explained in the following part, the whole interest is converted into trust
property by the secret trustee's own action—his prior self-declaration—and not by his conscience (or rather, his
court-imposed conscience in equity).

Alastair Hudson dismisses the possibility that the subject matter can be distributed as a gift by citing the well-
established rule in Milroy v Lord39 that a court will not use a trust to perfect what was intended to be a gift.40 If the
testator intended to give a gift but, because it fails, the court construes it as distribution of property in trust, the
Milroy v Lord rule would be violated. Under the post-death trust theory, however, the trust is not being used to
perfect a failed gift. The gift is being made as it was intended. Upon receipt by the trustee, the trust previously
declared by the trustee (as settlor) is constituted. This article will now turn to the controversial proposal that the
trustee, rather than the testator, is settlor of the fully-secret trust.

Declaration of the trust

For a private express inter vivos trust to be valid it must be (i) declared and (ii) constituted.41 There are two methods
of constituting a trust: first, a settlor declares herself trustee over property she owns, and second, the settlor
transfers property to a trustee.42 The conventional view of fully-secret trusts is that they are of the second type. The
testator acts as settlor, declaring the trust when the terms are communicated to the secret trustee and transferring
the property to the trustee upon the death. In contrast, under the theory advanced in this article, a fully-secret trust
is of the first type. Rather than the testator declaring the trust, the secret trustee makes a self-declaration of trust (or
more accurately, promises to create a trust with property she will own) when she acquiesces to holding the property
to be received under the will on trust.43 This concept conflicts with all prevailing secret trust theories, but the author
begs the indulgence of the reader to consider this possibility.

A secret trustee would almost surely not say, 'I promise that I will create a trust with the property that I will be
receiving as an outright gift'. But there are no magic words needed to declare a trust.44 The key is the intent of the
settlor manifested in the language used.45 Is a testator not saying, at the moment of communication to the secret
trustee, 'I am giving you a gift under my will. When you receive it, will you agree not to keep it as a gift but to hold it
on trust for my secret friend?' And by a simple nod, is the secret

Trusts & Trustees (2015) 21 (7): 802 at 808

trustee not expressing, 'I am receiving a gift under the will. When I get it, I will not keep it as a gift but I will hold it on
trust.'46
 Reconceptualizing the fully-secret trust

The idea that the trustee could be regarded as the one who has made the declaration has been raised and
summarily dismissed by David Hodge.47 Hodge reasons that, because silence alone can suffice as acquiescence in
the context of a secret trust, the clear evidence required of a trustee's intention to create an express trust would not
exist.48 This article suggests, respectfully, that Hodge misses an important distinction between fully-secret and other
types of express trusts: at the moment of declaration, a secret trustee is responding to a request to create a trust,
while settlors of non-secret trusts are initiating a declaration of trust. It is axiomatic that a settlor of an ordinary
express trust must use language—either orally or in writing—that manifests her desire to establish a trust. Muttering
unintelligibly, nodding, or simply remaining silent obviously cannot suffice. One would not even know whether the
person is thinking about trusts at all. This is starkly different, however, from a person who has been asked to hold a
gift on trust. A simple nod or a 'sure', in fact, would be the normal response. It would be unusual, and indeed sound
awkward, for a person—other than perhaps a trust lawyer—to respond to the request by exclaiming, 'Yes, I agree to
create a trust for X with the bequest that you intend to give me'. In a secret trust situation, compared with a typical
express trust, much less evidence to prove a declaration (or even a promise to create a trust in the future) should
be required.

The idea that a trust can be declared over a gift raises novel—and challenging—conceptual questions. Is not a
transfer either a gift or a trust? Is there conceptual space for something in the middle, where it is both? And if it is
possible, how can intention be determined? As noted earlier, both courts and scholars have characterized the
subject matter of a fully-secret trust as a gift that must be held on trust. Recall that in Blackwell v Blackwell, Lord
Buckmaster called it a 'fiduciary gift'. Albert Oosterhoff explains that the property is transferred as a gift under law,
and then equity intervenes to compel the transferee to hold it on trust:
Equity always operates in this way. It allows title to be transferred in accordance with the common law or statute, but
then, if there is cause for equity to intervene, it imposes a trust on the recipient of the property.49
The notion that a gift can be made that must be held on trust, therefore, has been contemplated before and, though
perhaps controversial, is clearly possible.50

Though to some extent we have tackled the concept of a transfer as both gift and trust, divining the testator's
intention remains. One could argue that a gift to be held on trust is simply a trust, and should be treated that way,
because the testator's ultimate intention is that the property be held in trust; or in the same vein, that the testator
presumably means exactly what he says to the secret trustee—that the property be held in trust. But is that really all
that the testator has said? In making a fully-secret trust, the testator has said two things: first, in the will, he has said
that the property is to be given as a gift; second, outside the will, he has asked that the property be held in trust.
This combination is unique among trusts and should not be ignored because it reflects a different procedural
intention, but the same ultimate intention, as other trusts. To illustrate, compare the following situations: (1) X owns
a bank account and transfers the entire account 'To Y', then subsequently asks Y to hold the account on trust for Z;
and (2) X owns a bank account and transfers the account 'To Y, as

Trusts & Trustees (2015) 21 (7): 802 at 809

trustee of the Z Trust'. In the first scenario, Y would have the right to refuse to hold the account for Z because it was
transferred as an outright gift, whereas in the second, Y would have no such right. This is true even if X's intention
at the commencement of both scenarios was that Y ultimately hold the property in trust. Scenario 1 is
distinguishable, of course, from a fully-secret trust where the request to hold the property on trust is necessarily
made prior to the transfer of property. Yet the point is that in Scenario 1, the transferor's words clearly reflect an
intention to make a gift, even though what is in his mind may be different, and it is those words that are decisive in
determining intention. I submit that, when the words clearly and unambiguously create a gift, the subsequent
conversation with the secret trustee to hold the property on trust should not be construed to change that meaning
because it has not revoked the previous disposition. Instead, the testator's intention should be construed to be
exactly what was said: first, that a gift should be made, and second, that gift be held in trust.

Typically, of course, a settlor is a person who owns the property, declares the trust, and intends by the trust to
 Reconceptualizing the fully-secret trust

benefit someone. This is not, however, necessarily true. For instance, X could, with the intention of benefitting his
daughter, Y, request that his mother, Z, put some of her assets in trust for Y. Here, X is the person who originally
intends to benefit Y, but Z is clearly the settlor. There is no legal obstacle to a person requesting another to create a
trust, even when no consideration is given. With a fully-secret trust, the crucial fact that makes the trustee, rather
than the testator, the settlor is that the trustee will receive the property as a gift and thus technically be the owner of
the property, at least in the executor's eyes, because the property is distributed by the executor as an outright
transfer.

This is where the fully-secret trust again unearths more fundamental issues of trust law. Ownership, rather than
intent to benefit someone, must be the criterion to determine the identity of the settlor. Although it is true that a
testator may own the property at the time of the communication with the secret trustee, that ownership changes
when the executor distributes the property. Thus, a declaration of trust by the testator would be void as ownership
will change prior to constitution of the trust. To illustrate, if X declares a certain property held in trust for Z with Y as
trustee, but then X changes his mind and gives the property outright to W, the prior declaration clearly becomes
void. The property would not be held on trust and X cannot settle the property unless he becomes owner again. W,
however, as owner—and with a secret trust, the secret trustee is in the same position as W—could very well
declare a trust over the property.

Distribution as a gift is what makes the fully-secret trust singular, and why the principles of the post-death theory do
not apply, and should not be extended, to other trusts. With all other trusts—half-secret, non-secret testamentary
and inter vivos trusts—the trust property is transferred in trust to a trustee, not as a gift. Thus, the suggestion that
the post-death trust theory, if accepted, could convert all trustees into self-declaring settlors because theoretically
all trustees could be deemed to be agreeing to hold a gift in trust, is misplaced. It is only with the fully-secret trust
that the property is transferred as an outright gift.

Transforming the gift into trust property

This part addresses how under the post-death trust theory the property transforms from gift to trust. A transfer (or
more accurately, transformation) from the secret trustee as donee of a gift to himself as trustee of a trust, though it
need not be formalized, must occur conceptually. The theory advanced in this article is that at the moment the
property is transferred to the secret trustee, it becomes trust property by virtue of the legal owner having previously
promised or declared that it would be held on trust.51

Trusts & Trustees (2015) 21 (7): 802 at 810

As discussed above, one method by which a trust may be formed is by an owner of property declaring himself
trustee of the property.52 There is no need for any formal transfer as the trustee already owns legal title. A settlor will
typically own the property first and then, at some subsequent moment, decide to declare the property held in trust.
There are no insurmountable conceptual obstacles, however, to the reverse: a declaration of trust preceding
ownership of the property and constitution of the trust.53

The conceptual wrinkle that arises if the trustee is the settlor of the fully-secret trust—and David Hodge's second
reason for rejecting the possibility of the trustee as settlor—is that the trustee does not own the property at the time
of the communication between the testator and trustee.54 The property at that instant is future or 'after-acquired'
property for the trustee. Future property cannot be the subject matter of a trust—at least without some further
subsequent manifestation of intention55—and thus a declaration over that property by the trustee would presumably
be unenforceable.56 Furthermore, a settlor may promise to hold after-acquired property on trust (rather than declare
it held on trust), but that promise is not enforceable by volunteers such as the secret beneficiary.57 How, then, does
the trust become enforceable?

As with the idea developed above that the settlor is necessarily the owner of trust property rather than merely the
 Reconceptualizing the fully-secret trust

person intending to benefit another, the fully-secret trust also tests another basic principle of trust law relevant not
just to secret trusts, but to all trusts: the ability to covenant to settle—and then revoke the covenant of—future
property. This article proposes—and case law supports—that in the context of a fully-secret trust, when there is
either a declaration of trust over future property or a promise to settle future property and the property finds its way
into the hands of the trustee, it will automatically and irrevocably be held on the trust previously declared or
promised.58 No further declaration or promise is necessary.59 Thus it is immaterial whether the trustee's
acquiescence is understood as a declaration over after-acquired property or as a promise to create a trust with
future property. While under normal circumstances both would be unenforceable by volunteers, under the post-
death trust theory both are enforceable because the property has made its way into the trustee's hands, triggering
the irreversible imposition of the trust.

The theoretical underpinning of this theory—that the secret trustee is immediately and irrevocably bound to hold the
property in trust at the moment it is received because she has previously declared a trust or promised to hold after-
acquired property in trust and because, as trustee, she has come to hold legal title—merits discussion. Applicable
judgments, although not dealing with secret trusts or with settlors who are also trustees, indicate that once property
is properly delivered to the trustee of a trust that was either made upon declaration of future property or covenanted
upon settlement of future property, the trust is completely constituted. In Re Ellenborough,60 the settlor's subsequent
delivery to the trustees of after-acquired property received under her sister's will that she had unsuccessfully
purported to transfer earlier resulted in that part of the trust being completely constituted, presumably because the
transfer could be construed as a further declaration.61 In Re Adlard, three sisters who had covenanted to hold future
property in trust and then mistakenly believed that they were

Trusts & Trustees (2015) 21 (7): 802 at 811

required to transfer the property to the trustees were unable to later revoke the transfers.62

In Re Ellenborough and Re Adlard, however, the settlors delivered the property to the trustees, indicating an
additional manifestation of intention to create a trust. In contrast, in a fully-secret trust, the property does not arrive
from the settlor (the secret trustee) but rather from the executor. When the property comes to the trustee by some
route other than from the settlor, the enforceability of the trust may depend on whether the settlor had an interest in
the property at the time of the declaration or covenant.63 In Re Ralli's Will Trusts, the settlor had a vested interest in
a reversion expectancy under her mother's will at the time that she (the daughter) made the covenant to settle. The
trustee of the settlement also happened to be the trustee of the mother's will. The settlor predeceased her mother,
which meant that the reversionary interest would not be distributed to her (the daughter—in fact, the daughter's
estate) until her mother subsequently died. At the time of distribution, the interest came into the trustee's
possession, not as trustee of the settlement but as trustee of the will. The Chancery Division held, nonetheless, that
the trustee held the property on trust for the beneficiaries of the settlement.64

In contrast, in Re Brooks' Settlement Trusts, the Chancery Division held that when a trustee comes to receive the
property by means other than from the settlor, and at the time of the settlement the settlor merely had a future
expectancy, the trustee must not hold the property subject to the settlement. There were two settlement
agreements in this case. The first was a settlement created by the settlor's father, in which the settlor's mother had
a life interest and power of appointment. The second settlement agreement was the settlor's, in which he voluntarily
settled his expected interest in the first trust. At the time of his settlement, his interest was merely a speculative
future interest. The trustees of the settlor's settlement and the trust of which his mother was beneficiary were the
same bank. Subsequently, the settlor's mother appointed a sum to him. As the appointment created a new estate in
favour of the settlor, the trustees asked whether they had to hold the property subject to the settlor's settlement or
give the property to the settlor outright. The Court held that the settlor should receive the property outright as his
prior settlement—which had been made on future prop-erty—did 'not operate as a valid assignment or declaration
of trust'.65

Citing Re Brooks' Settlement Trusts,66 David Hayton makes a strong case for permitting a settlor to revoke his
 Reconceptualizing the fully-secret trust

covenant to settle when a trustee has fortuitously received property without the settlor having been responsible for
the vesting of title in the trustee.67 Hayton concedes, however, that the result would be different if the settlor had
authorized the trustee to hold the property pursuant to the settlement or to receive the property via a route other
than the settlement.68 Hayton also recognizes that the Chancery Division in Re Ralli's Will Trusts69 held otherwise,
although apparently without having had the benefit of the decision in Re Brooks' Settlement Trusts brought to its
attention.70

While one could argue that the distinction between the two cases, Re Ralli's Will Trusts and Re Brooks' Settlement
Trusts, was that in the former the settlor had a present interest at the moment of the declaration and in the latter
there was merely a future interest, the Court in Re Ralli's Will Trusts did not use this as a basis for its decision.
Instead, it focused on 'unconcientiousness', reasoning that 'it would be unconscientious in [the trustee] to retain as
against

Trusts & Trustees (2015) 21 (7): 802 at 812

[the volunteers under the settlement] any property which he holds in consequence of the provisions of the
settlement'.71 On the other hand, 'it is not unconscientious in the [trustee] to withhold from [the settlor's] estate the
fund which [the settlor] covenanted that he should receive: on the contrary, it would have been unconscientious in
[the settlor] to seek to deprive the [trustee] of that fund'.72

How does the fully-secret trust fit into this maze of judgments? This author is unaware of any judgments in which a
settlor of future property subsequently receives that property, with himself as trustee, as a result of having promised
to hold it in trust. In all of the cases discussed above, the settlors and the trustees were different people and when
the settlors settled property based on a perceived obligation, such as in Re Adlard, they were the ones who
transferred the property, rather than the trustee receiving by some other route.

Recall that what makes Re Ralli's Will Trusts and Re Brooks' Settlement Trusts relevant is that, as with fully-secret
trusts, the after-acquired property (ie acquired after the declaration of trust) in those cases arrived to the trustee
from someone other than the settlor and other than subject to a trust. In Re Ralli's Will Trusts it arrived by a will as a
distribution of estate assets and in Re Brooks' Settlement Trusts, it arrived by appointment. Similarly, with fully-
secret trusts, the property arrives from the testator's estate as a gift rather than from a settlor subject to a trust. The
question then in all three cases is whether the trustee must hold the property pursuant to the instrument from which
he is receiving it (eg pursuant to the will as a gift) or pursuant to the trust he had earlier declared (ie pursuant to the
trust). Re Ralli's Will Trusts held that it must be held in accordance with the trust, while Re Brooks' Settlement
Trusts held the opposite.

If one views the essential distinction between these cases as whether the settlor's interest at the time of declaration
is future or present, then the secret trustee would not have to hold the property in trust. If, however, one considers
the 'unconcientiousness' emphasized in Re Ralli's Will Trusts as the key, then a secret trustee would clearly be
bound to hold the property for the secret beneficiaries. Though these cases are similar in some important ways to
fully-secret trusts, a significant difference supports the argument that the unconscientiousness standard of Re
Ralli's Will Trusts should apply to fully-secret trusts. The difference is that in Re Ralli's Will Trusts and Re Brooks'
Settlement Trusts, the property reached the trustees fortuitously (by chance, the trustees of the wills and trusts
happened to be the same entity), while with fully-secret trusts, the testator and secret trustee specifically and
expressly intend that it reaches the trustee. A fully-secret trust is deliberate, planned, and foreseeable. In fact, the
secret trustee has, by acquiescing to hold the property on trust, induced the testator to leave the property as they
have planned. Thus, while in a fortuitous situation the outcome may be debatable, in the special context of fully-
secret trusts, where there are clear elements of inducement and reliance, this article suggests that
unconscientiousness is the proper standard by which to determine a trustee's ability to retain the property for
himself.

A possible objection to this analysis is that under the post-death trust theory there is no unconscientiousness and
 Reconceptualizing the fully-secret trust

no fraud because the property is transferred as a gift, giving the secret trustee complete freedom to use it how she
wishes. Comparisons may be made to cases like Lamb v Eames73 or Re Adams and the Kensington Vestry,74 in
which precatory language like 'to be at her disposal in any way she may think best' or 'to the absolute use of my
dear wife …in full confidence that she will do what is right as to the disposal thereof between my children', was held
to be merely expressions of hope or desire, and thus insufficient to show certainty of intention to create a trust. But
these cases are clearly

Trusts & Trustees (2015) 21 (7): 802 at 813

distinguishable from the gift made to the secret trustee. The testator of a fully-secret trust does not 'hope' that the
trustee holds the property in trust, nor does he give the trustee freedom to use the property 'in any way she may
think best'. Instead, the testator transfers a gift with a clear and definite promise from the trustee that the gift will be
held on trust. With a conventional trust, the testator does not need this promise because the trust itself binds the
trustee to the trust obligations. The trustee has no choice, and thus need not make any promise. With a fully-secret
trust, in contrast, because the will provides for an outright gift, the testator must seek and obtain the trustee's
promise. This distinguishes the fully-secret trust from all other trusts.

To summarize, the secret trustee declares/promises to create a trust when she assents to the testator's request. At
that time, it is a future speculative interest for the trustee because the testator can revoke the bequest. Upon receipt
of the property as a gift, the trustee becomes the outright owner. When an owner of property has declared the
property to be held on trust, no transfer of legal title is necessary, but a declaration made over future property is
unenforceable absent some subsequent manifestation of intent. This article proposes that, because the trustee of a
fully-secret trust comes into possession of the property in a manner consistent with the settlor's (his own) previously
declared wishes and expectations which were established at the time of communication with the testator, and
because it would be 'unconscientious' for the trustee to break his promise and deprive the secret beneficiaries of
the property, it must be held subject to the trust.

Applying the post-death trust theory to practical problems

A number of practical problems have arisen as a result of the duplicitous nature of fully-secret trusts. As just one
example, if the secret trustee predeceases the testator, should the court treat the decedent as a beneficiary or
trustee? The answer to this question, as well as others, determines whether the disposition fails or survives.
Authorities go both ways. This section of the article explains how the post-death trust theory would apply to some of
these problems.

When the secret beneficiary or secret trustee predeceases the testator

Generally, when a beneficiary under a will predeceases the testator, the gift lapses to the estate. The prevailing
authority on what happens when a secret beneficiary predeceases the testator is Re Gardner (No. 2),75 in which the
Chancery Division held that the gift would not lapse.76 The Court appears to have held that the trust becomes
effective, and the deceased beneficiary's interest vests, upon the testator's declaration of trust and secret trustee's
acquiescence. The court's authorities for and explanation of the decision were rather scant, though, and the
judgment has been roundly criticized because beneficial interests cannot arise in a secret trust before the
constitution of the trust upon (or after) the testator's death.77

Analysis of this issue under the post-death trust theory would be consistent with, but slightly different from, the
criticism of Re Gardner (No. 2). If the testator does not amend the will after learning of the beneficiary's death, the
property would be distributed outright upon the testator's demise to the secret trustee and, upon receipt, would
automatically be converted into trust property. Without a beneficiary, the property would be held by the secret
trustee on resulting trust for the testator's heirs.78
 Reconceptualizing the fully-secret trust

In contrast, when a trustee of a testamentary trust predeceases the testator, the trust generally survives because
the trustee can be replaced without defeating the testator's intention. The Court of Appeal observed

Trusts & Trustees (2015) 21 (7): 802 at 814

in dictum that when a secret trustee predeceases the testator, the gift lapses,79 apparently because on the face of
the will a beneficiary (not a trustee) appears to have predeceased the testator. Dictum by the House of Lords, on
the other hand, has implied that although technically the gift would lapse, a court would interfere to prevent the
failure,80 presumably because equity will not allow a trust to fail for want of a trustee.81

Under the post-death trust theory, the gift should lapse because a distribution of the property by the executor to a
different donee would contravene the express terms of the will. As noted though, courts may see fit to intervene to
save the trust.

When the secret trustee or secret beneficiary attests the will

Under the Wills Act, gifts to beneficiaries who attest the will are void.82 Accordingly, attestation by a secret trustee,
who on the face of the will appears to be a beneficiary, invalidates the gift.83 It would be surprising if the result were
otherwise. A lawyer assisting in the will attestation who noticed that the secret trustee was also witnessing the will
would justifiably warn against it. If the testator were to not reveal the terms of the secret trust to the secret trustee
until after the execution of the will, this result would be eminently logical. However, in a situation where the terms
have been communicated before the execution of the will, the trustee should be able to attest the will as she knows
that the property will eventually be held for another. One could argue that no one but the trustee knows this, and
thus others could justifiably prevent, or at least discourage, the trustee from attesting the will, but if she does attest
and the gift is later challenged on this ground, there is no compelling reason why the challenge should prevail.

A similar analysis applies to a secret beneficiary attesting the will. In Re Young,84 the Chancery Division held that a
secret beneficiary can attest a will without invalidating the gift because her beneficial interest is completely
unconnected to the will. Again, this makes sense if the secret beneficiary and secret trustee do not know of their
true roles. But if the settlor has informed them both, which is perfectly acceptable and in no way invalidates the
secret trust, surely, the knowing secret beneficiary is no less interested or biased—and thus susceptible to the
temptation to unduly influence the testator—than an apparent beneficiary of a non-secret trust.85

Following current English law, under the post-death trust theory a knowing beneficiary of a fully-secret trust should
be able to attest the will without jeopardizing the gift to the secret trustee and the contingent beneficial interest that
the beneficiary expects to enjoy. After all, the gift in the will is technically an outright testamentary bequest and the
trust is completely independent of the will. Similarly, the secret trustee's attestation would invalidate the gift.86 Yet
perhaps a better and more nuanced analysis would be for the effect of attestation by secret trustees and
beneficiaries to be determined based on their knowledge of their interests at the time of attestation. A gift to an
attesting secret trustee would be presumed void unless the secret trustee could prove that she knew at the time of
attestation that the gift would be subject to the secret trust, and a secret beneficiary's interest

Trusts & Trustees (2015) 21 (7): 802 at 815

should be presumed valid unless the testator's heirs could prove that the beneficiary knew at the time of attestation
that the gift would be subject to the secret trust. Ultimately, the testator can avoid these difficulties of concept and
evidence by simply selecting witnesses other than the secret trustee and beneficiary to attest the will.
 Reconceptualizing the fully-secret trust

When the subject matter is land

While the dehors the will theory—with some dissension among academics—helps to a certain extent to address
why secret trusts need not comply with the requirements of the Wills Act, and the post-death trust theory completely
severs the trust from the will, neither theory adequately addresses the enforcement of secret trusts that contravene
sub-section 53(1)(b) of the Law of Property Act 1925, which requires that all declarations of trusts of land—whether
testamentary or not—be evidenced by writing. This section provides:
[A] declaration of trust respecting any land or any interest therein must be manifested and proved by some writing
signed by some person who is able to declare such trust or by his will.
The original purpose of requiring land transactions to be manifested and proved by some writing was to prevent
fraud.87 Other purposes, such as increasing certainty, protecting consumers, making ownership manifest and
encouraging care have also emerged.88 Yet courts regularly uphold oral secret trusts whose subject matter is land
despite their failure to comply with sub-section 53(1)(b).89 The equitable concept of the constructive trust has
sometimes been used to skirt this problem, as constructive trusts need not comply with statutory formalities such as
the requirements of the Wills Act or the Law of Property Act.90

Under the post-death trust theory, a trust whose subject matter is land would still usually be declared orally
(although by the trustee) and without proof in writing, and thus would technically fail to comply with the Law of
Property Act. The trust would not be void, but merely not provable in a court of law and thus not normally
enforceable against the trustee.91 The complexity of the analysis increases under the post-death trust theory
because the fully-secret trust is made through a self-declaration in which the owner/settlor and trustee are the same
person. Clearly, a trustee is not able to defraud himself,92 and if he kept the land for himself he could not be said to
be defrauding the secret beneficiary, to whom he has made no promises.

The seminal case De La Rochefoucauld v Boustead93 sheds some light on how courts could approach the
enforcement of oral trusts of land in which the settlor and trustee are the same person. Rochefoucauld, the niece of
a baron, inherited a coffee estate encumbered by a mortgage. She claimed that after the estate was put up for sale
by the mortgagee, she agreed with Boustead that he would purchase the estate, hold it in trust for her, and release
it to her when she reimbursed him for the purchase price and his expenses. Instead, Boustead sold the estate,
claiming it had been conveyed to him as beneficial owner. There was no contemporaneous written evidence of the
trust agreement but the Court of Appeal was clearly persuaded by the nature of the transaction and other testimony
and evidence that Boustead had received the property subject to a trust in favour of Rochefoucauld. The Court
enforced the trust to prevent the statute from being used to perpetrate fraud.

Technically, the case involved a self-declaration of an express trust. On the transfer document from the

Trusts & Trustees (2015) 21 (7): 802 at 816

mortgagee, Boustead must have appeared as the outright beneficial owner because Rochefoucauld kept her name
off all formal documents to prevent her ex-husband from discovering her interest in the estate. And if the transfer
had been made to Boustead 'as trustee', there would be little dispute as to the nature of his ownership. In some
ways, the trust was similar to a fully-secret trust in that Boustead promised that once he received the estate he
would, as beneficial owner, hold the property in trust with himself as trustee. As such, he was both settlor and
trustee.

Though the Court of Appeal in Rochefoucauld enforced the self-declared oral express trust of land, there were
important differences from what would normally transpire with a typical fully-secret trust. In Rochefoucauld, there
appears to have been written parol evidence that 'proved that the estates in question were conveyed …upon trust'
and there was evidence that the trustee had been giving effect to the trust, or at least that he refrained from
repudiating Rochefoucauld's claims, leading to potential reliance by the trust beneficiary.94 With a typical fully-secret
trust, there would generally be no written parol evidence and no reliance by the secret beneficiary, who would often
not even be aware of the trust.
 Reconceptualizing the fully-secret trust

Would these differences lead a court applying the post-death trust theory to a different conclusion than the
Rochefoucauld court or courts that have upheld secret trusts under the conventional theories? Probably not. The
court in Rochefoucauld reasoned that 'it is fraud on the part of a person to whom land is conveyed as a trustee, and
who knows it was so conveyed, to deny the trust and claim the land himself'.95 Though under the post-death trust
theory the secret trustee technically receives the property not as trustee but as donee, the property is immediately
converted to trust property, thus making a denial of the trust just as fraudulent as if it were transferred in trust.
Moreover, the fact that the fully-secret trust involves a self-declaration appears unimportant in this context because
the statute requires that the declaration, not the transfer, be evidenced by a writing made by the person able to
declare the trust—here the secret trustee. There is no exception from this requirement for self-declarations. Finally,
while it is true that a trustee of a fully-secret trust cannot defraud himself, he could defraud the testator. Under the
post-death trust theory, the settlor whose declaration of trust did not observe the statutory formalities is the same
person who would be relying on the statute to invalidate the trust. Such a situation, where additionally the settlor
has promised to hold the land in trust and the testator has relied on that promise in making the bequest, may be an
appropriate one for equity to intervene.

The analysis may be different in the case of disclaimer, discussed in detail in the next section. It is doubtful that in
Rochefoucauld the court would have forced Boustead to purchase the estate if he changed his mind after agreeing
with Rochefoucauld but before the actual purchase. Similarly, in the case of a fully-secret trust, obliging the secret
trustee to accept the distribution (as opposed to holding it in trust after acceptance) may be stretching the reach of
equity too far.

It is worth emphasizing at this point that the major benefit of the reconceptualization of the fully-secret trust
proposed herein is that it solves the problem of non-compliance with the Wills Act. It is not, however, able to answer
the difficult policy questions inherent in deciding whether equity should intervene to salvage trusts that fail to comply
with the Law of Property Act (or, as discussed below, to prevent the secret trustee from disclaiming or revoking his
promise). Ultimately, these are questions which call for the weighing of, on one hand, the important benefits of
requiring land transactions to be evidenced by writing and, on the other hand, allowing settlors freedom to transfer
property as they desire, with all the risks that entails.

Trusts & Trustees (2015) 21 (7): 802 at 817

When the trustee disclaims the property or revokes the declaration

Due to the conceptual change in the timing of the constitution of the trust and vesting of the beneficiary's interest
under the post-death theory, there is a period in which the secret trustee can sabotage the trust, albeit usually not to
her personal benefit. This period, between the testator's death and the time of the transfer of the gift to the trustee,
is when disclaimer can occur.

Disclaimer takes place when a beneficiary declines to receive a bequest. It occurs after the testator's death but
before the beneficiary has enjoyed any benefits of the inheritance.96 A beneficiary who disclaims is treated as if he
predeceased the testator.97 In 1902, the Court of Appeal noted in dictum that in the event of disclaimer, the secret
trust would fail, while in 1929, the House of Lords opined that a court would not allow the trust to fail because the
disclaimer would amount to fraud.98

Under the post-death trust theory, the secret trustee should be able to disclaim because at the moment of
disclaimer, the secret trustee is the anticipated recipient of an outright gift. Though the secret trustee has either
made a declaration of trust or a promise to create a trust, the trust has not become fully constituted. There is no
technical obstacle to disclaiming. A problem arises where the trustee colludes with the testator's heirs, intentionally
shifting the benefit from the intended secret beneficiaries to the testator's heirs, perhaps pursuant to some quid pro
 Reconceptualizing the fully-secret trust

quo. The trustee may also be a residuary legatee, which would result in personal benefit from a disclaimer.99 Some
suggest that equity would intervene to prevent such an unconscionable result.100

The time between the testator's death and distribution of the bequest is also particularly vulnerable to outright
revocation by the secret trustee. Traditional theories provide that the testator is the settlor of a secret trust, and
therefore is the person who has the power to revoke the declaration of trust. The post-death trust theory shifts this
key role to the secret trustee. As a result, a new danger arises: the secret trustee has the power to revoke the
declaration of trust, which would completely dissolve the trust, leaving the trustee to benefit from the intact gift.
Conceptually, this is slightly different from traditional theories, where the trustee can either revoke his promise to
hold the property in trust or renounce his trusteeship. In either of these cases, a court could justifiably determine
that the trust declaration remained valid and the appointment of a new trustee would remedy the problem. Under
the post-death trust theory, however, revocation by the trustee would mean that there would be no incomplete trust
to mend. Prior to the testator's death, this danger is minimised by the testator's ability to amend the will, but during
the time period near her death and until the property is distributed by the executor, the trustee's ability to revoke his
prior declaration or promise to settle is essentially without hindrance, at least under law.

Disclaimer and revocation are perhaps the Achilles heels of the post-death trust theory. By eliminating to a large
extent the control of the testator over the creation of the trust and shifting it to the secret trustee, the theory also
allocates to the trustee the ability to undo the trust. There is an important difference between the two, however, that
would arguably permit disclaimer but not revocation: disclaimer relates to a gift, while revocation relates to a trust.
As the donee of the gift in the will, the secret trustee has no power to disclaim until the testator's death, as the gift
remains revocable by the testator until that time. Upon

Trusts & Trustees (2015) 21 (7): 802 at 818

and after the testator's death, the trustee must notify the executor of his intention to disclaim prior to distribution of
the property. Again, from the perspective of the executor, a beneficiary is disclaiming. No red flag would be raised.

On the other hand, revocation involves rescinding the declaration of trust upon which the testator has relied. Under
any of the theories—the fraud theory, the dehors the will theory or the post-death trust theory—the secret trustee
would be obligated to notify the testator if, during the testator's life, the trustee wished to withdraw. Failure to do so
would imply continued acceptance and bind the trustee to her promise. If after the death of the testator, the secret
trustee wished to withdraw, and in the case of the post-death trust theory, revoke, similarly the trustee would have
to notify the executor of this change of heart. To remain silent would arguably imply continued acceptance, even
under the post-death trust theory where the trustee is both settlor and trustee. The author has not found any legal
authority addressing the limitations on or requirements for revocation by a self-declaring settlor/trustee who has
declared a trust at the request of another. A strong argument can be made, though, that if the owner of property is
transferring the property with the expectation that it be held in trust, and the transferee knows this and has in fact
induced the transfer, it is not enough to effect revocation for the transferee to simply and silently think to himself, ''I
change my mind.'' Once the secret trustee has notified the executor of the revocation, a red flag would be raised
and then, armed with the knowledge of the existence of the trust, the executor could request that the court appoint a
new trustee.

Conclusion

Since its beginning, the fully-secret trust has been conceived as a trust declared by the testator and constituted
upon the testator's death. These are logical characterizations consistent with the conceptualization of ordinary
testamentary trusts. This article sought to question these presumptions based on the unique nature of the fully-
secret trust. By giving an outright gift in the will, the testator causes the nature of the transfer of property to change
from what ordinarily would be a transfer to a trustee to what becomes a transfer to a donee. As a result of this
change, the trustee rather than the testator must be the person who creates the trust because the trustee becomes
owner of the property, and only an owner can declare a trust over property.
 Reconceptualizing the fully-secret trust

The post-death trust theory is not the solution to all the complicated questions that arise from the use of fully-secret
trusts, but in providing a new way of conceptualizing this historically thorny concept, the theory is able to resolve
some of these questions without forfeiting the protection that testators have come to expect.

End of Document