Formalities and secret trusts

This note addresses the formalities required for the creation and disposition of equitable interests, and the principled (if contested) exception represented by the doctrines of fully secret and half-secret trusts. The coherence of English trusts law depends on the delicate equipoise between evidential security—embodied in writing and attestation requirements—and the maxim that equity will not permit a statute to be used as an instrument of fraud.

The core statutory framework is fourfold: s 53(1)(b) of the Law of Property Act 1925, which mandates signed writing for declarations of trust over land; s 53(1)(c), which requires signed writing for dispositions of subsisting equitable interests; s 53(2), which exempts resulting, implied and constructive trusts from both; and s 9 of the Wills Act 1837, which prescribes formalities for testamentary dispositions. Secret trusts operate outside the Wills Act framework, crystallising—so the traditional view holds—inter vivos, by detrimental reliance and the settlor's communication.

The doctrinal questions are urgent and perennial. When does communication of a trust occur? Is acceptance essential or merely evidential? What distinguishes a half-secret trust (where the will discloses the trust but not its terms) from a fully secret trust (where the will is silent)? Does the theoretical basis lie in fraud prevention, express trust, constructive trust, or a sui generis dehors-the-will mechanism? And can formality requirements be reconciled with the underlying policy favouring testamentary freedom and the prevention of unconscionable reliance on legal form?

You will encounter this material in Week 3 tutorials, in problem questions requiring forensic application of Ottaway v Norman, Blackwell v Blackwell, and Re Stead, and in essays debating whether secret trusts undermine or vindicate the Wills Act. By the end of this note, you should be able to deploy the statutory provisions with precision, articulate the theoretical bases for secret trusts, and critically evaluate the coherence of the modern case law.

The formalities regime reflects successive legislative attempts to prevent fraud and perjury in the transfer of property. The Statute of Frauds 1677 first required trusts of land to be 'manifested and proved' by signed writing (s 7) and prohibited 'grants and assignments' of trust interests unless in writing signed by the party disposing (s 9). The mischief was clear: oral testimony too easily fabricated claims to land and equitable interests. Equity, however, qualified the statute from the outset: if the legal owner took property on an oral undertaking to hold it for another, and then pleaded the statute, equity would prevent that fraud by imposing a constructive trust. Rochefoucauld v Boustead [1897] is the foundational authority, holding that the Statute of Frauds (and by extension the modern Law of Property Act) cannot be invoked to perpetrate or cover up fraud.

Secret trusts have a longer history still. The ecclesiastical courts once had testamentary jurisdiction and did not insist on attestation; chancery developed its own overlay, enforcing oral promises made by legatees. By the mid-nineteenth century, the device was settled: a testator could make an apparently absolute gift by will, having secured a binding promise from the legatee to hold the property on trust. McCormick v Grogan (1869) LR 4 HL 82 articulated the fraud rationale: the donee accepts the legacy on the faith of an undertaking; to renege is unconscionable. The Wills Act 1837 was not displaced but rather reinforced by equity's insistence that a statute not become a cloak for dishonesty.

The modern statutory architecture—ss 53(1)(b), (c) and (2) LPA 1925—consolidated the Statute of Frauds framework, but the older equitable doctrines persisted. The conceptual puzzle is this: if secret trusts are genuinely inter vivos and bind conscience before death, why are they governed by principles of communication and acceptance that look testamentary? And if they are testamentary, how can they evade s 9 Wills Act? The historical answer is that equity never regarded them as testamentary; the will is merely the occasion for the trust to take effect. The modern question is whether that fiction remains defensible, or whether secret trusts should be re-theorised as constructive, arising from unconscionable conduct rather than settlor intention.

Inter vivos declarations: s 53(1)(b) LPA 1925

A declaration of trust respecting land or any interest in land must be 'manifested and proved by some writing signed by some person who is able to declare such trust or by his will'. No particular form is required; the signed writing may be contemporaneous or subsequent, so long as it evidences the three certainties. Silence or unsigned correspondence will not suffice: Gardner v Rowe (1828) 5 Russ 258. Critically, s 53(1)(b) is evidential, not constitutive: an oral declaration creates an enforceable trust if subsequently evidenced in signed writing. That distinction matters for timing: the beneficiary's interest crystallises when the declaration is made, not when it is written.

Dispositions of equitable interests: s 53(1)(c)

Section 53(1)(c) LPA 1925 provides that 'a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will'. Unlike s 53(1)(b), this is constitutive: an unsigned oral disposition is void. The reach of s 53(1)(c) extends beyond express assignment. In Grey v IRC [1960] AC 1, the House of Lords held that oral directions by a beneficiary to trustees to hold on new trusts was a disposition requiring writing. Vandervell v IRC [1967] 2 AC 291 held that where the beneficiary directed trustees to transfer the legal title and the equitable interest passed automatically by operation of law, s 53(1)(c) did not bite: the beneficiary had not 'disposed' but rather invoked the bare trustee's ministerial duty. That distinction between active disposition and automatic resulting trust has generated vast academic literature and remains fragile.

The s 53(2) exception

Foundation

1. Tessa owns a house. She declares orally to her friend Freya, 'I hold this house on trust for you.' Three months later, Tessa confirms the declaration in a signed letter. Advise Freya.

1. By his will, Walter leaves £100,000 to his solicitor Stephen 'to hold on trust for purposes I have communicated to him'. Before executing the will, Walter told Stephen to distribute the money to three named charities. Stephen accepted. After the will, Walter told Stephen to give the money to a fourth charity instead. Stephen did not respond. Walter has now died. Advise the charities.

Standard

1. Victor's will contains the following gifts: (i) 'My estate to my brother Boris absolutely'; (ii) 'My shares to my friend Fiona, to hold on such trusts as I may communicate to her.' Before the will, Victor told Boris orally that Boris should give half the estate to Victor's illegitimate daughter Diana. Boris said, 'I'll think about it.' After the will, Victor told Fiona to hold the shares for his mistress, Mona. Fiona agreed. Victor has died. Advise Boris and Fiona.

1. Explain the theoretical basis for secret trusts and evaluate whether the doctrine undermines the policy of the Wills Act 1837.

Challenge

1. 'The distinction between fully secret and half-secret trusts is arbitrary and indefensible. The requirements for communication and acceptance should be the same.' Critically evaluate this statement with reference to case law and academic commentary.

Essential

• J. Mee, 'The Role of Expectation in the Determination of Property Rights Upon Intestacy' in J. Getzler (ed), Rationalizing Property, Equity and Trusts: Essays in Honour of Edward Burn (LexisNexis, 2003) ch 8 (secret trusts and intention)
• D. Wilde, 'Secret and Semi-Secret Trusts: Justifying Distinctions Between the Two' [1995] Conv 366
• B. Perrins, 'Can You Keep a Secret?' (1972) 88 LQR 225

Advanced

• P. Critchley, 'Instruments of Fraud, Testamentary Dispositions, and the Doctrine of Secret Trusts' (1999) 115 LQR 631
• R. Nolan, 'Vandervell v IRC: A Case of Overreaching' [2002] CLJ 169
• S. Gardner, 'Reliance-Based Constructive Trusts' in C. Mitchell (ed), Constructive and Resulting Trusts (Hart, 2010) ch 3
• C. Rickett, 'Mutual Wills and the Law of Restitution' (1989) 105 LQR 534

Casebooks and treatises

• Hayton & Mitchell, Underhill & Hayton: Law of Trusts and Trustees (20th edn, LexisNexis, 2022) ch 9
• Penner, The Law of Trusts (12th edn, OUP, 2022) ch 4
• Glister & Lee, Hanbury & Martin: Modern Equity (22nd edn, Sweet & Maxwell, 2022) ch 6

Historical

• Lord Nottingham's Chancery Cases (Selden Society vol 79, 1961) (early equitable intervention in secret trusts)

Comparative

• D. Hayton, 'The Development of the Trust Concept in Civil Law Jurisdictions' in D. Hayton (ed), The International Trust (3rd edn, Jordans, 2011)