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Justin Santiago, BAppSc (Hons), MBA, LLB (Hons) comes from a journalism, market research, intellectual property and strategic communications consulting background. Now based in Melbourne he spends his time advising businesses on how to communicate to their customers as well as writing on various subjects of interest in this blog.

Sunday, March 8, 2009

Secret Trusts

Is there any coherent argument for the admission of non-conforming evidence in the case of secret trusts? - Justin Santiago

The law requires that for a disposition to be effective and that the equitable interest is assigned to the beneficiary it must be in writing according to S53(1)(c)of the Law of Property Act 1925. The Wills Act 1837 also only allows last wishes to be made in writing, signed by the testator and signed by two people who have witnessed the testator's signature formally.

Secret trusts involve making an oral declaration without the details being made public save only to the person who is asked to put into effect those wishes. In the case of fully secret trusts there is no trust at all because for all intents and purposes it is an absolute gift to the legatee.

Apart from not fulfilling the written requirement, secret trusts also bypass very fundamental trust requirements such as the requirement for imperative words, evidence of acknowledgement by the trustee of the terms of the trusts and the trustee also being the beneficiary :-

Trusts need to consist of imperative words and have objects that are certain.

In the case of half secret trusts the trust consists of precatory words and also is not clear on the objects.

Trusts must be manifested by means of an acknowledgement that the trustee be bound by the terms of the trust : Ottoway v Norman. In the case of both fully secret and half secret trusts there is no evidence of acknowledgement that the secret trustee by bound by the terms of the trust.

In the case of fully secret trusts because the secret trustee is the beneficiary there is a wide scope for fraud as the trustee could claim that he would take of the gift absolutely.

Several justifications for allowing secret trusts have been put argued by several theories in defence of secret trusts such as the fraud theory and the dehors the will theory to justify their justify their admission. However it seems that these theories are mainly used to the testator to make such a disposition as he or she pleases without the details being made public as in the case of transfer of property to a mistress or an illegitimate child. Two theories which are frequently cite are the fraud theory and the dehors the will theory :-

The Fraud Theory

The fraud theory states that secret trusts would be enforced by a court of equity in favour of a secret beneficiary on grounds that equity will not permit a statute to be used as an instrument of fraud. The fraud theory supposes that the purpose of the fraud would either be for the trustee to take the gift absolutely for his personal gain and to deny the secret beneficiary or to disappoint the wishes of the settler (expanded fraud theory : Blackwell v Blackwell).

The Dehors (Outside) the Will Theory

The dehors the will theory states that the the secret trust operates outside the testator’s will and should not be regarded as testamentory trusts at all. This is exemplified by the rule that in probate law is that the will does not take effect until the testator's death. Therefore, if a named beneficiary is not alive at that time, his estate is not entitled to anything. However, in Re Gardner, the secret beneficiary's estate was held to be entitled to the deceased beneficiary's interest under the half-secret trust. This supports the view that the trust comes into existence `dehors the will', but does not explain when the trust was constituted. In any case, this decision is out of line with normal probate rules.

There is a further third theoretical justification that the doctrine of secret trusts is part of the law on incorporation by reference which states that a document can be incorporated into a will by being referenced in the will, but only if the document exists at the time the will is executed. However secret trusts is about oral testimony and hence this theory has been rejected.


  1. how do you defend a secret trust when the secret trustee uses her own fraud to first steal the trust fund and then attempt to claim perately on the promissory note left with the will to impose that trust.
    All of the rules were followed for a secret trust.
    The promissory note in question involved annual interest payments (as his assurance that she was consistantly in agreement until his death)
    covertly she met with the estate lawyer with her daughter and filed a false affirmation stating the interest had not been paid and was owing. As well arranged with him that this would be claimed at a later date until real property was sold and funds were available.
    (held as tenanats in common)
    trustees could not get note attached to the RRIF (testamentary disposition) and futher estate lawyer refused to communicate with trustees regarding a notice for notes.
    Is he assiting in her breach? The estate was insolvent at time of death. All available assets rolled to spouse with life interest in his portion of property.
    Estate lawyer also refused to transmit propoerty to trustees.
    The entire estate was paralized from the begining by actions of secret trustee, her family and the estate lawyer.
    How do you prove innocent fraud to impose trust against mailcious fraud intended to defeat secret trust.
    We were pushed into probate, pushed out of opportunity for court direction and pushed out of the spouse's life.
    The daughter has effectively stolen the trust property and is now waiting for, though no claim has been filed, the money from the notes that were deliberately misinterpretted by her.
    I have been told I must accept losing and pay.
    Though she worked hard to steal the trust fund if I allow her to also steal the value of the note intended to impose the trust it will allow her to continue on to her next victim.
    She is now hanging out a the local seniors center.
    There are alot of ethical and trust issues involed in this case and I need to win it.


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