Equity & Trusts: Secret Trusts

In the meticulous world of succession law, the "Will" is a sacred document. To be valid, it must comply with strict statutory formalities under the Wills Act 1837. However, Equity has long recognized a shadowy exception: the Secret Trust. A secret trust occurs when a testator leaves property to a person in their Will, but that person has privately agreed to hold it for the benefit of someone else. This article provides a comprehensive deep dive into the mechanics of secret trusts, exploring the "Dehors the Will" theory, the "Fraud Theory," and the sophisticated legal requirements established in cases like Blackwell v Blackwell and Kasperbauer v Griffith.

1. Foundations & Historical Context

The Secret Trust is a creature of necessity, often used to provide for people the testator did not want to name publicly. Historically, courts justified them using the "Fraud Theory": "Equity will not allow a statute to be used as an instrument of fraud." In the 20th century, the "Dehors the Will" Theory emerged, suggesting the trust exists outside the Will entirely (inter vivos), merely triggered by death. This theory explains why secret trusts can bypass the Wills Act formalities.

2. Fully Secret Trusts (FST)

In an FST, the Will looks like an absolute gift. To be valid, three elements must be proven (Kasperbauer v Griffith [1997]): (1) Intention to create a legal obligation; (2) Communication of the terms to the trustee before death; and (3) Acceptance by the trustee. If communication happens only after death (e.g. a found letter), the trust fails (Re Boyes).

3. Half Secret Trusts (HST)

In an HST, the Will mentions a trust but not the beneficiaries. The rules are stricter (Blackwell v Blackwell [1929]): Communication must happen before or at the time the Will is executed. The Will must not refer to future communications (the rule against "future-gazing" in Re Keen).

4. Key Cases — Detailed Analysis

5. Critical Analysis & Academic Debate

Professor Alastair Hudson argues that the "Dehors the Will" theory is a "legal fiction" designed to avoid a clash with the Wills Act. He views it as "Equity gone rogue." Conversely, Professor David Hayton defends the doctrine as protecting the "intention of the dead," arguing that the Wills Act should not be used to facilitate fraud by trustees.

6. Worked Example — Problem Scenario

ISSUE: Is this a valid Fully Secret Trust (FST)?

APPLICATION: Communication happened before death, satisfying the FST rule (Re Boyes). Brian's agreement constitutes acceptance.

CONCLUSION: The trust is valid. Brian would be using the Wills Act as an "instrument of fraud" if he kept the money.

7. Examiner Insights — How to Score Top Marks

Conclusion

Secret Trusts are a place where the "conscience" of Equity overpowers the "certainty" of the statute. Mastering them requires navigating the fine line between statutory form and the demands of justice.