Trusts & Trustees, Vol. 25, No. 8, October 2019, pp.

855–860 855

Equity as a nest: the principle-based secret

trusts
Samuel Yee Ching Leung*

Abstract The scope of the ‘prevention of fraud’ principle

The fraud theory and the dehors the will theory are
generally considered as the starting points for ana-
lysing secret trusts. However, both theories have
been severely criticised. This article argues that the
fraud theory is defensible from a jurisprudential
perspective and should be preferred. Had a ‘prin-
ciple-based’ approach been adopted in the ana-
lysis, secret trusts can indeed be justified on the
basis of a legal principle—‘the prevention of
fraud’—so that the dehors the will theory is un-
necessary. The ‘principle-based’ approach should
be distinguished from the ‘rule-based’ approach
which is suitable for the analysis of statutes. The
‘principle-based’ approach can also reconcile
fully-secret trusts and half-secret trusts.
Introduction
This article argues that ‘the prevention of fraud’ is the
legal principle governing secret trusts. Secret trusts
should be treated as principle-based in contrast to
rules-based statutes. Therefore, secret trusts by their
nature belong to constructive trusts and this renders
the dehors the will theory unnecessary. This approach
could also justify both fully-secret and half-secret
trusts.
The principle governing secret trusts is preventing
fraud, as the House of Lords ruled in McCormick v
Grogan and Blackwell v Blackwell.1 This has been af-
firmed in the judgments following those two cases.2
Along with the judicial development of secret trusts,
the concept of fraud has been expanded as ‘a fraud on
the testator’,3 which is different from the concept of
fraud in common law. This concept of fraud in equity
triggers the court to bind a trustee as it ‘fasten[s] on
his conscience’.4 It is a wide concept which does not
necessarily involve personal gain.5 Simply put, the
basis of the concept is that ‘you cannot break a prom-
ise you made with someone who has died’. Since the
trustee has accepted responsibility, a testator has
received a promise that the secret trust will be carried
out. The testator’s guaranteed wish would be fru-
strated6 regarding any non-performance, which pro-
vides room for equity to intervene.7 The testator’s
perspective focuses on the effect of not carrying out
the promise given the testator’s reliance on the trus-
tee. Whether the trustee is an honest trustee8 does not
change that reliance. It is completely the opposite of
making a will which is unilateral and does not create
any reliance. It would be an irreparable harm to fail a
dead person who has relied on the trustee9 and would

* Faculty of Laws, University College London (UCL), UK. Email: samuelleung@link.cuhk.edu.hk

1. McCormick v Grogan (1869) LR 4 HL 82 (HL), 88, 97; Blackwell v Blackwell [1929] AC 318 (HL), 336.
2. GW Allan, ‘The Secret is out There: Searching for the Legal Justification for the Doctrine of Secret Trusts Through Analysis of the Case Law’ (2011) 40
Common Law World Review 311, 314–328.
3. Cullen v Attorney General of Ireland (1866) LR 1 HL190 (HL), 198; Blackwell (n 1) 341.
4. McCormick (n 1) 88; Blackwell (n 1) 335.
5. Blackwell (n 1) 329.
6. D Hayton et al., Underhill and Hayton Law of Trusts and Trustees (19th edn, LexisNexis, 2016) 598.
7. ‘[T]he mere failure to recognize a promise may trigger the intervention of equity’. M Levenstein, Maxims of Equity (Algora Publishing, 2014) 53.
8. P Critchley, ‘Instruments of Fraud, Testamentary Dispositions, and the Doctrine of Secret Trusts’ (1999) 115 Law Quarterly Review 631, 650–651.
9. Gillett v Holt [2001] Ch 210 (CA), 228.

ß The Author(s) (2019). Published by Oxford University Press. All rights reserved. doi:10.1093/tandt/ttz079
Advance Access publication 26 August 2019
856 Articles Trusts & Trustees, Vol. 25, No. 8, October 2019

have chosen another way had he known beforehand
that the promise would not be carried out. The ra-
tionale is plainly and clearly reflected along a chain of
judgments.
However, this extensive meaning was fiercely at-
tacked by critics. It was said that the wideness of
the concept of fraud makes it undefined.10
However, wideness does not equal to indefinability.
Arguendo, may it be imprecise, in every single case, a
judge considers whether the present case falls into a
particular category. Simply because judges cannot tell
the exact definition of a concept in advance does not
mean that they cannot distinguish afterwards. Take
the concept of justice as an example. We cannot
give an exact definition of justice, but this does not
mean that we cannot distinguish justice from injust-
ice. A series of cases may form a spectrum, and hence
we reach a reflective equilibrium11 of the concept of
fraud. The principle is hard to define a priori but
could be determined a posteriori, through a chain of
interpretations.12 Judges base their reasoning on plain
principle(s), and through a series of applications get a
‘silhouette’ of the principle(s) that is clear enough for
the next round of application. Therefore, the claim
that the concept of fraud is so wide as to be indefin-
able should be rejected with respect. The prevention
of fraud principle is determinable by the methodology
of a reflective equilibrium.
Principle-based secret trusts v Rule-based Will
Act 1837
Secret trusts are governed by the principle (‘the pre-
vention of fraud’), while statutes stand as rules. The
reason why it seems hard to justify the conflict
between secret trusts and the Will Act 1837 is because
the difference between their operations is overlooked.
Rules are applied in an all-or-nothing manner where
they cannot contradict each other.13 However, prin-
ciples do not operate that way. Principles can be
contradictory as they, respectively, have ‘a dimension
of weights and importance’.14 Occasionally, the
weight of a certain principle is heavier than others,
and hence some principles take priority over other
principles. In a legal system, principles and rules can
be and are often contradictory.15
Consider Riggs v Palmer16 about testamentary dis-
position. The legatee murdered the testator and
claimed the entitlement of the estate under the stat-
ute. However, the court rejected his claim notwith-
standing that it was in direct conflict to the statute
because a judgment in favour of the legatee would be
contrary to the principles of justice. Put into the UK
context, it is almost certain that courts would have
ruled the same. It is impossible to let a murderer take
the estate as ‘one cannot take property by inheritance
or will from an ancestor or benefactor whom he has
murdered’.17 It perfectly shows that in certain cir-
cumstances, the weight of a principle can be so
great as to trump a statute. Therefore, the right ques-
tion about secret trusts should be whether in the pre-
sent case the principle of preventing fraud has enough
weight to merit disregarding the statute, not whether
the statute can be disregarded in light of the principle.
We should bear in mind that the body of equity is
composed of principles, not rigid rules. Secret trusts
are not exceptions. The very purpose of equity is to
alleviate the unjust result brought by strictly applying
legal rules.18 As a collection of principles, equity must
be irregular like a nest. It explains why maxims in

10. ‘The fraud which the doctrine seeks to prevent is so vaguely defined [. . . and . . .] ill-defined.’ J McGhee et al., Snell’s Equity (33rd edn, Sweet & Maxwell,
2015) 662–663.
11. J Rawls, A Theory of Justice (Harvard University Press, 1971) 20. The principle could theoretically be constructed.
12. R Dworkin, Law’s Empire (Hart Publishing, 2012) 246–247.
13. R Dworkin, Taking Rights Seriously (Harvard University Press, 1978) 24–25.
14. Ibid 26.
15. ‘[M]odern legal cultures are torn in conflicting directions by irreconcilable premises’. GP Fletcher, Basic Concepts of Legal Thought (Oxford University Press,
1996) 188.
16. 115 NY 506 (1889). Interactions between principles and rules run the same way in US.
17. Ibid 513.
18. S Gallagher, Equity and Trusts in Hong Kong: Doctrines, Remedies and Institutions (Sweet & Maxwell, 2017) 6.
Trusts & Trustees, Vol. 25, No. 8, October 2019 Articles 857

Reconciling parliamentary supremacy

equity prima facie ‘can seem contradictory’.19 We
cannot allocate weights to principles simply by look-
ing at them in the abstract. The exercise can only be
done if we have facts before us, which enable us to
give weights to principles in every single case. It is a
misconception to disregard the nature of prevention
of fraud as a legal principle and to claim that ‘this is
obviously no valid justification for the departure from
a clear legislative intent’.20
The judges clearly had the concept of how evidence
points to facts21 (which are the catalysts of allocating
weights to principles as abovementioned) despite the
evolution of requirements regarding the standard of
evidence along judgments.22 The judges determined
the strength of evidence required to establish the facts
that enable them to apply and accordingly give weight
to the principle of preventing fraud in secret trusts.23
The weight of the principle can only be measured
when judges have facts. Mr Allan cannot appreciate
the mechanism of how evidence eliminates the
abstractness of the principle, claiming that the ques-
tion ‘regarding the standard of proof required in
secret trusts cases’ is ‘unnecessary’.24 Judges need to
ensure that there is a testator’s reliance. Not enforcing
the secret trusts will result in the frustration of the
promise between testator and trustee—a ‘fraud on the
testator’. The higher degree of certainty of a fraud is
being done on a testator, the more willing a judge is
to enforce a secret trust.
The weight of the principle can only be mea-
sured when judges have facts
A criticism may be made that by conducting a weight-
ing exercise between the principle of the prevention of
fraud and the Will Act 1837, judges offend the doc-
trine of parliamentary supremacy. Mr Allan claims
that overruling the statute may cause a constitutional
issue.25 However, the claim is based on a misinter-
pretation of the doctrine of parliamentary supremacy.
Judges give effect to the spirit of statutes,26 not only
their literal meaning. Strictly adhering to the literal
meaning causes problems.
First, as Professor Hart profoundly stated, statutes
are open-texture.27 It is dangerous to prefer the literal
meaning as opposed to the meaning combined with
legal principles. When there are hard cases28 before
the court where there is no answer, or it is hard to
decide because applying the statute may give an
absurd result, judges resort to legal principles.
Inevitably, judges go beyond statutes as we see in
secret trusts cases.
Secondly, when a statute was enacted, drafters could
not have foreseen every future possibility. They may
not have intended to give effect to the statute had a
specific case brought to them beforehand.29 The con-
cepts of what was actually intended and the concept of
what should have been intended must be clearly dis-
tinguished.30 The literal meaning of a statute does not
thoroughly reflect what was actually intended by the
drafters as they may have been ignorant of a particular
situation that they should have been intended to create
an exception for. One must be cautious that statutory
interpretation is a task of finding out what should have
been intended by the drafters.

19. Ibid 45.

20. E Challinor, ‘Debunking the Myth of Secret Trusts’ (2005) Conveyancer and Property Lawyer 492, 499.
21. Bannister v Bannister [1948] 2 All ER 133 (CA), 136.
22. Podmore v Gunning (1836) 7 Sim 644 (Ch), 660–661; McCormick (n 1) 97; Blackwell (n 1) 337.
23. McCormick (n 1) 97; Brown v Pourau [1995] 1 NZLR 352 (HC), 369.
24. Allan (n 2) 324–325, 327.
25. Ibid 328–330.
26. Professor Ekins stated that ‘[i]t is unsound for interpreters to take ‘‘the statutory purpose’’, detached from the full chain of reasoning on which the legislature
acted.’ (R Ekins, The Nature of Legislative Intent (Oxford University Press, 2012) 251.) I use the term ‘spirit’ following Blackwell (n 1) 336.
27. HLA Hart, The Concept of Law (2nd edn, Oxford University Press, 2012) 126–130.
28. Dworkin (n 13) Chapter 4. Judges must give weights to legal principles and considerations to arrive at a result (ibid 118).
29. ‘[P]resumptions of intent serve only [. . .] assist in clarifying the content of Parliament’s instructions when [. . .] the legislators’ intentions have not been
transparently conveyed.’ TRS Allan, The Sovereignty of Law (Oxford University Press, 2013) 173.
30. R Dworkin, A Matter of Principle (Oxford University Press, 2001) 20–21.
858 Articles Trusts & Trustees, Vol. 25, No. 8, October 2019

Thirdly, there may be a boundary that even statutes
cannot cross.31 As Sir Edward Coke, by virtue of Dr
Bonham’s case,32 was said to claim that courts should
have ‘the large power of equitable construction, to
avoid consequences that Parliament could not have
intended, or to modify provisions that were nonsens-
ical, self-contradictory, or otherwise impossible to
apply’.33 Parliamentary supremacy is not founded
on absolute power that demands strict compliance.
A better view is that the parliament is not bound by
its predecessor.34 The parliament has the freedom to
amend the law by enacting new statutes. It can over-
rule judgments by ‘relegislation’ had the parliament
disagreed with judges.35 However, since the beginning
of secret trusts in Thynn v Thynn,36 more than
300 years have passed, but parliament has chosen
not to intervene. Parliament has implicitly consented
to judges’ interpretation of the interaction between
prevention of fraud principle and the Will Act 1837.
Therefore, to consider secret trusts as contrary to par-
liamentary intention is itself neglecting the implied
parliamentary intention.
Secret trusts as constructive trusts
Since secret trusts are principle based, its validity
comes from the application of the principle, not
from compliance with certain formalities. Secret
trusts must be by nature constructive trusts rather
than, as proposed in Lewin,37 express trusts. Its
effect comes from the operation of law which is a
judicial exercise. The three conditions, namely, inten-
tion of the testator, communication to the trustee,
and acceptance of the trustee38 are not formalities
but the prerequisites for inferring the testator’s
reliance, which then triggers the application of the
principle.
Therefore, it is unhelpful to look simply at the re-
sults of the judgments to conclude that the majority
of the judgments are consistent while others are in-
consistent. When a secret trust was not enforced, it
was simply because the facts in that particular case, as
established by evidence, did not show that there was a
fraud on the testator. In turn, judges were not able to
give enough weight to the principle to outweigh the
force of the Will Act 1837. The principle is always the
same—the prevention of fraud. The principle behind
and the juridical reasoning are indeed coherent. One
cannot look at the result and neglect the mechanism
behind it. The right perspective is therefore not
whether the results of the judgments are consistent
but whether the principles used to reach the judg-
ments are coherent.
The right perspective is therefore not whether
the results of the judgments are consistent but
whether the principles used to reach the judg-
ments are coherent
Categorising secret trusts as constructive trusts ex-
plain why the statutory formality need not be followed.
It puts aside the problem of the transfer of land.39 The
validity of secret trusts depends on the operation of
law, not formality. This categorisation is in line with
Brown,40 and squarely fits into the principles of the law
of trusts made by Lord Browne-Wilkinson in a land-
mark case in the history of equity:
Equity operates on the conscience of the owner of the
legal interest [. . .] [T]he conscience of the legal owner

31. ‘[T]here exists a higher plane of legal principle, given concrete meaning and effect in the common law, which serves to place inherent limits on the legislative
power of Parliament.’ M Gordon, Parliamentary Sovereignty in the UK Constitution (Hart Publishing, 2015) 128.
32. (1610) 8 Co. Rep. 107 (CtCP).
33. J Goldsworthy, The Sovereignty of Parliament (Oxford University Press, 2002) 111 (Emphasis added).
34. L Green et al., Oxford Studies in Philosophy of Law (Oxford University Press, 2011) 167.
35. ‘[T]he courts determine the legal effect of Acts of Parliament but Parliament may always relegislate to overrule the courts, subject again to the courts’
determining the legal effects of the relegislation’ (Ibid 166–167).
36. (1684) 1 Vern 296 (KB).
37. L Tucker et al., Lewin on Trusts (19th edn, Sweet & Maxwell, 2015) 94–95.
38. Blackwell (n 1) 334; Tucker ibid 95–98.
39. McGhee (n 10) footnote 144 of 663, where Re Baillie (1886) 2 TLR 660 (HC) ruled that the ‘lack of writing may prevent enforceability of unwritten secret
trusts of land’ in contrast to Ottaway v Norman [1972] Ch 699 (Ch) where an ‘unwritten secret trusts of land upheld’.
40. Brown (n 23) 368.
Trusts & Trustees, Vol. 25, No. 8, October 2019
requires him to carry out the purposes for which the
property was vested in him (express or implied trust)
or which the law imposes on him by reason of his
unconscionable conduct (constructive trust).41
It links back to the central concept of conscience
which is the source of the prevention of fraud
principle.
Under this principle-based approach, the classifica-
tion question of whether the constructive trust upheld
is a testamentary disposition (governed by the Will
Act 1837) or an inter vivos transaction (governed by
the Law of Property Act 1925)42 becomes irrelevant
and unimportant. Even if it is prima facie a testament-
ary disposition,43 the legal principle of prevention of
fraud takes priority and triggers the operation of a
constructive trust afterwards.
Responding to the dehors the will theory
Under the dehors the will theory, the true meaning of
‘outside the will’44 could be read differently in our
principle-based approach. After judges have made
the determination that the prevention of fraud prin-
ciple should take priority over the Will Act 1837, the
Act simply has no role to play regarding the secret
trust since the rule applies in an all-not-nothing
manner and it therefore should be neglected when it
has been outweighed. The principle suggests that the
rule is inapplicable in the present case. The operation
of the constructive trust leaves no room for the ap-
plication of the legal rule. Hence, logically, the con-
structive trust must be outside the will.
Also, as stated in McCormick45 and Blackwell,46 the
operation of secret trusts is, in time, after the will. The
trustee obtained the property by virtue of the will and
41. Westdeutsche Landesbank v Islington London Borough Council [1996] AC 669 (HL), 705 (Emphasis added). Notwithstanding that the case is not dealing with
secret trusts, the principles regarding trusts must be coherent.
42. Hayton (n 6) 358.
43. Critchley (n 8) 641.
44. Cullen (n 3) 196; Blackwell (n 1) 334; Re Young [1951] Ch 344 (Ch), 350; Re Snowden [1979] Ch 528 (Ch), 535.
45. McCormick (n 1) 88.
46. Blackwell (n 1) 334.
47. Ibid 337.
48. Tucker (n 37) 89.
49. Blackwell (n 1) 339.
Articles 859
immediately needs to transfer the property to the
beneficiary due to the secret trust. The operations of
the will and the secret trust are under a chronological
sequence. The secret trust cannot be enforced before
the effect of the will.
In terms of operation and time, the dehors the will
theory is not pointing to the central question—
whether the prevention of fraud principle has
gained enough weight to take priority over the Will
Act 1837. The fraud theory is to be preferred since it
suffices in explaining the enforcement of secret trusts.
Reconciling fully secret trusts and half-secret
trusts
Under the principle-based approach, fully and half-
secret trusts could be reconciled by notwithstanding
the additional communication requirement.
The Will Act 1837 disallows any other forms of
testamentary disposition.47 One obvious reason is
that everything in the will must be determined and
crystalized at the time when it is executed. Even in the
case of incorporation of documents, the documents
need to exist before the execution of the will.48 The
spirit of the Will Act 1837 is to have everything in the
will settled in avoidance of any uncertainty.
Regarding half-secret trusts, it exists by virtue of the
will as the existence of the beneficiary is in the will.
Therefore, assuming the communication requirement
is loosened, it would directly contradict the spirit of
the Will Act 1837 and destroy the certainty within the
will. The judge in Blackwell clearly was aware of this as
he ruled that ‘testator cannot reserve to himself a
power of making future unwitnessed dispositions by
merely naming a trustee and leaving the purposes of
the trust to be supplied afterwards’.49 In the name of
860 Articles Trusts & Trustees, Vol. 25, No. 8, October 2019

the prevention of fraud, principle alone is insufficient
to directly contradict50 the Will Act 1837, during the
time span of its effect within the will, to prima facie
deal with the testamentary disposition and invent an
uncertainty in the will—a consequence that the Will
Act 1837 is trying to avoid as the certainty within a
will must be preserved. Since no other valid prin-
ciple(s) could be observed, judges cannot by simply
relying on one legal principle disregard the spirit of
the Will Act 1837 in preserving the certainty within a
will during its effective time span. To respect the spirit
of the Will Act 1837, judges had to give one more
restriction not to affect the stability within a will, but
only operate a constructive trust after the will. The
communication requirement serves as a balance
struck between paying respect to the statute by avoid-
ing direct conflict without a valid principle and giving
effect to the prevention of fraud principle after the
will.
In contrast, the existence of fully secret trusts is
totally out of the will. Although secret trusts operate
as constructive trusts afterwards, a will stands alone.
To enforce a fully secret trust is simply a matter of
how much weight should be given to the principle to
operate a constructive trust after the will which is
irrelevant to the content in the will.
Conclusion
Under a principle-based approach, the fraud theory is
preferable to the dehors the will theory in reconciling
secret trusts with the Will Act 1837. Equity is like a
nest composed of a mess of self-conflicting principles
that conflict with the rules but nonetheless work perfectly
well. When jurisprudential and constitutional views are
taken into account, a high degree of coherence is demon-
strated in both fully secret and half-secret trusts, and the
doctrine fits squarely into our judicial reasoning.

Samuel Yee Ching Leung is a Master of Laws candidate at the Faculty of Laws of University College London. He
holds a Juris Doctor (Dean’s List) from the Chinese University of Hong Kong (CUHK) and a Bachelor of
Business Administration (Honours) from the Hong Kong Baptist University. He was a researcher and
Consultant of the Vis Moot team at CUHK and has been awarded various moot prizes. E-mail:
samuelleung@link.cuhk.edu.hk

50. Since the existence of the beneficiary is mentioned in the will.

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