Secret Trusts Are Scrutinised In Every Trust Law Text-book (Essay Sample)

TOPIC: “Secret trusts are scrutinised in every trust law text-book. 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?” Critically discuss.
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Abstract
The paper was a critical examination of the statement: “Secret trusts are scrutinised in every trust law text-book. 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?” The aim of this paper was to shed light on one of the conceptual conundrums of law— secret trust. The research hypothesis was that there has not been and there is no consensus in legal though as pertaining secret law and its various contentious issues. The evidence relied on during the discussion was mainly derived from academic books. Case law, legislation and statutes were also relied on during the discourse.
The approach was critical in nature, critically analysing the various arguments and theories that have been put forward on secret trust. A critical review of the existing literature is a central part of the approach in the discussion.
The discussion is of great significance due to the fact that secret trust has been a conceptual conundrum for centuries. The conclusion of the discussion is that, despite the fact that secret trust contravenes the Wills Act 1837 and the Land Property Act 1927, courts still make decisions upholding secret trust and hence the need to reconceptualise the concept of secret trust.
Introduction
The concept of secret trust has long been an area of contention within UK Law. Despite having been analysed in almost every secret trust book that has been published, there has been very little consensus on the premise and tenets of secret trust. Trust refers to where an individual offers land to another person to look after the affairs of the land on their behalf., Secret trust, on its part, is where one person wants to benefit another person who cannot be named in the will so he thus enters into an arrangement with a trusted confidant (the trustee) to receive the gift under the will apparently for the trustees benefit whereas the trustee is actually holding it in trust for the real beneficiary who cannot be named in the will.
Secret trusts are either classified as being fully secret or half-secret trusts. Under fully secret trusts, the existence of the trust and the terms/conditions are not revealed. Oral evidence of the agreement is considered sufficient and the settlor has to have intended to create the trust and communicated the same to the trustee who has to explicitly or impliedly accept the role and terms. The existence of the trust and the beneficiary’s identity are not disclosed in the will. A half-secret trust, however, requires for the fact of the trust and the terms therein to be revealed to the trustee prior to the execution of the will.
Stewart Manley, in his article ‘Reconceptualising the fully-secret trust’ makes the case for the need to have the fully-secret trust concept reconceptualised due to issues such as its non-compliance with the Wills Act 1937 among others. He takes issue with conventional thought concerning secret trust, arguing that contrary to popular belief, “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, and that the settlor of a fully-secret trust is not the testator, but the secret trustee.” The following discussion shall therefore set out to shed light on some of these contentious areas. In the process, the paper shall attempt to ascertain whether a fully secret trust is testamentary or inter-vivos, if it is express or constructive and whether its apparent failure to comply with the requirements of the Wills Act should be disregarded so as to prevent fraud or because it is outside scope of the will.
Discussion
There are a number of reasons as to why secret trusts are scrutinised in every trust law text-book. Secret trust relates to wills, and this an emotive subject because it not only deals with property but the property of a deceased person and who the beneficiaries are. Secret trusts are a conceptual conundrum due to the fact that, for one, it is unclear as to whether secret trust is express or constructive. An express trust is one that is pronounced by the settlor while a constructive trust is as a result of a court decision. A majority of writers who have contributed to the subject are of the opinion that they are express because of the intentions that were pronounced by the testator and conveyed to the trustee while the testator was still alive., This view is problematic, though, because an express trust of land should be proven in writing as per the provisions of the Land Property Act.
In Ottaway v Norman, for instance, a secret trust existed but no written proof was available. Interestingly and to the chagrin of several legal minds, the court upheld the trust and failed to discuss the writing requirement. As such, the court possibly deemed the trust to be constructive and therefore not requiring writing as per the provisions of the Law of Property Act 1925. However, the law is quite clear— if a secret trust of land is to be considered an express trust; it should be proven in writing, in adherence to Section 53 (1) b of the LPA.
Secret trusts undoubtedly raise several questions concerning the relationship between express trusts and implied trusts. The reason why equity law created the doctrine of secret trusts to begin with was to prevent any attempts by the trustee to fraudulently lay claim to the property left for the beneficiary. While this was a noble aim, it is impossible to escape the conceptual quagmire that has resulted from this doctrine with respect to deciding on how to classify the secret trust yet so many likelihoods exist— the trust can be express or constructive trust and even a one-time rule premised on the equitable principles of preventing fraud.
Furthermore, the secret trust is a direct infringement of the provisions of the Wills Act 1837 as well as Sections 52 and 53 of the Law of Property Act which provides that transfers of land must be by deed for them to be considered valid)., Section 53 (1) of the Law of Property Act 1925, for instance, provides that trusts have to be created expressly and in adherence to Section 53 (1) (b) of the Act. In addition, all related pronouncements have to be done in writing and signed by the trustor or stated in his/her will. The legality of this written intention or pronouncement can only be disputed in court if it is found that fraud has taken place.,
Therefore, whereas secret trust shows the laudable commitment that equity has towards preventing the law from being used to perpetuate fraud, the fact that it itself contravenes the very law it seeks to protect is disturbing. The area of secret trusts therefore raises important questions concerning the function of equity in the law of trust to ensure that justice is served with respect to the parameters of the law. The fact is that, at its very core, a secret trust is a covert arrangement that operates outside the terms of the will and this should be a cause for concern for lawmakers. Therefore, while Equity carries out the testators true wishes of benefitting the third party, the means by which his wishes are realised breaches the provisions of the Wills Act.
The implications of the provisions of the Wills Act, however, are much wider than just that. A major implication is that, if the testator wants to change or amend the terms of the will or even draft an entirely new one, the change has to be in alignment with the provisions of the Act, otherwise it shall be considered invalid. In the same vein, if the testator wants to make an arrangement that is not part of the terms contained in the will, that arrangement should likewise be invalid since it is not in adherence to the terms of the will. Therefore, a secret trust is, from a legal standpoint, strictly invalid according to the provisions of the Wills Act 1837.
Secret trust is therefore a conceptual conundrum since it functions 'dehors the will' i.e. beyond the terms of the actual will. Section 9 of the Wills Act requires that a will be signed by the testator and his/her signature appended. This section clearly sets out the means by which a will is to be created if it is to be valid upon death and the aim of this was to prevent fraudsters from trying to lay claim to the property. The question as to whether the apparent failure of secret trusts to comply with the requirements of the Wills Act, be disregarded to prevent fraud, or because it is dehors the will is therefore critical.
There are, however, several justifications that have been posited for this strange aspect of secret trust for a long time, namely the fraud theory and dehors the will theory. The fraud theory is founded on the idea that equity should never allow the law to be a facilitator of fraud. The theory is premised on the Rouchefoucauld v Boustead 1897. In this case, land had been transferred to the defendant on the understanding that it would be held on trust for the Comtesse. The agreement was never put in writing. The defendant mortgaged the property and Comt...