Why are secret trusts enforceable despite noncompliance with the

formalities required by the wills act 1837 s9?

Secret trusts are a mechanism employed by a testator to secretly transfer their

property to a beneficiary without public knowledge of the intended recipient. In
certain cases, a testator may desire to transfer their property to a subsequent
spouse while ensuring that their former spouse remains unaware of the
arrangement. To achieve this, the testator may employ a secret trust, whereby
the identities of both the beneficiary and trustee are withheld and not disclosed
in the will, thus remaining concealed from public knowledge. There exist two
distinct categories of secret trusts, namely fully valid secret trusts and half
valid secret trusts. Secret trusts that are considered fully valid are those that
maintain confidentiality regarding the identity of the secret trustee, the
beneficiary, and the terms of the trust. Such trusts are not disclosed to the
public and are not explicitly acknowledged as trusts. On the other hand half
valid secret trusts refer to a type of trust where the trustee's name is disclosed
and the intentionis present in relation to the creation of the trust but the
identity of the beneficiary and the specific terms of the trust remain
undisclosed thereby rendering it a half valid secret trust.
The topic of secret trusts is widely debated among scholars and so there are
many different perspectives on this particular matter. Two primary and main
theories exist in law which serve to rationalize the continued recognition of
secret trusts, despite their nonconformity with the Wills Act of 1837. The fraud
theory is among the theories utilized by the courts to validate a secret trust,
and will be examined initially. The rationale of a person serving as a trustee to
hold property for a specific beneficiary, but subsequently retaining the property
for personal use without transferring it to the intended beneficiary, has been
widely employed as a justification. This justification was deemed acceptable in
the legal case of McCormick v Grogan, wherein the wills act of 1837 was
invoked. According to Lord Hatherley, the application of the fraud theory is
limited to specific cases where there is clear evidence of fraudulent conduct on
the part of the trustee. The case of Re Gardner established the acceptance of a
broad interpretation of fraud in relation to half-secret trusts, wherein the
testator's intention is ascertained. This expanded definition of fraud is invoked
by scholars to support the aforementioned theory. The utilization of fraud
theory has received endorsement from numerous scholars who argue that the
aforementioned conflicts between wills act and fraud theory have already been
acknowledged in the legal precedent of Rochefoucould v Boustead. In this
instance, a trust pertaining to land was established without a written
agreement, thereby contravening the Law of Property Act 1925. Nevertheless,
the court deemed the trust to be legally binding.
Nevertheless, the theory of fraud is subject to criticism and not universally
accepted. The House of Lords expounded on the existence of certain flaws in
the fraud theory. One such flaw was identified in the Grogan case, wherein
Lord Hatherley noted a discrepancy between the provisions of the will acts and
the implementation of the secret trust. A significant critique of the fraud theory
pertains to its association with half-secret trusts. The concept of a half-secret
trust involves the disclosure of the trustee's name in the will, while the identity
of the beneficiary remains undisclosed to the public. The likelihood of a trustee
engaging in fraudulent behavior by retaining ownership of a property for
personal gain is low, as such actions would constitute fraud and be difficult to
defend in a legal setting. The case of Blackwell versus Blackwell must be noted
as it has helped expand the fraud theory. Specifically, Lord Buckmaster shifted
the focus to the benefits received by the beneficiary, rather than the actions of
the trustee. This represents a departure from the typical emphasis on the
trustee's conduct in cases involving fraud. According to Lord Buckmaster, the
absence of fulfilment of a promise towards the testator by the legatee does not
constitute fraud. The establishment of fraudulence by a trustee can only be
substantiated if the trustee in question deceives the designated beneficiaries of
the trust, thereby depriving them of their rightful entitlements. Sheridan has
criticized the theory of extended fraud by raising concerns about the potential
invalidity of trust due to various reasons, including formalities. In such a
scenario, the intended beneficiary may not receive the gift, which would raise
questions regarding their status as a beneficiary. Critchley contends that the
expansion of fraud theory solely concentrates on the possibility of misconduct,
whereas it ought to center on the factual misconduct.
The Dehors the will theory, also referred to as the outside the wall theory, is
the second legal principle utilized by courts to uphold secret trusts. The
application of this theory is commonly observed in instances of partially valid
secret trusts, as the fraud theory primarily pertains to secret trusts that are
fully valid. The theory in question was applied in the legal matter of Blackwell v
Blackwell, wherein Viscount Summer opined that secret trusts are not subject
to the provisions of the Wills Act 1837 and are thus excluded from its purview.
The aforementioned theory was initially observed in the legal matter of Cullen v
Ag for Ireland, and subsequently applied in the Blackwell case by Viscount
Summer. In this instance, despite the absence of written correspondence
pertaining to the confidential trust, the court upheld its validity. This outcome
indicates that the court did not concur with the notion that secret trusts are
governed by the Wills Act of 1837. Secret trusts are governed by the general
law of trust by the courts, rather than being governed under the 1837 Wills
Act. This issue was further deliberated in the legal case of Cullen v Attorney
General for Ireland. According to Megarry's ruling in the recent Snowden case,
the establishment of a trust requires the ordinary civil standard of proof
instead of a higher standard, since secret trusts are not subject to the
regulations of the Wills Act 1837. One potential critique that arises in this
scenario pertains to the standard of proof utilized in cases involving allegations
of fraud. Some argue that the utilization of an ordinary civil standard may
inadvertently benefit the accused fraudulent trustees, and thus advocate for
the implementation of a higher standard of proof across all cases involving
fraud.
A crucial inquiry frequently is posed by critics pertains to the feasibility of a
secret trust functioning independently of the Wills Act. It remains unclear as to
what criteria would dictate the cessation of the application of probate
regulations and the adoption of the conventional trust law to facilitate the
operation of secret trusts. The resolution of this inquiry is contingent upon a
conflict between the aforementioned regulations, which arises solely in three
circumstances: firstly, when the beneficiary attests to the will; secondly, when
the beneficiary has predeceased the testator; and lastly, when the designated
trustee declines to fulfil their obligation.
To conclude, the legal notion of secret trusts is intricate and surrounded by
dispute. The validity of a secret trust is contingent upon the facts and
circumstances of each unique case in addition to the legal statutes and
regulations of the relevant jurisdiction. Although legal scholars have proposed
numerous theories the ultimate determination of a secret trust's validity rests
upon these aforementioned factors. Further research is necessary to
comprehensively comprehend the ethical and juridical ramifications of covert
trusts and to elucidate the regulations that oversee their establishment and
implementation.

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