Formalities and secret trusts

Secret trusts allow testators to create binding trusts that evade Wills Act formalities through equitable intervention. The doctrine has two branches: fully secret trusts (where the will makes an absolute gift but the legatee has accepted a trust obligation communicated before death) and half-secret trusts (where the will discloses trusteeship but not terms, requiring communication on or before the will's execution). Both require: (i) intention to create a trust; (ii) communication to the trustee; (iii) acceptance. The theoretical basis remains contested between the fraud theory (equity prevents unconscionable reliance on formalities) and the dehors-the-will theory (the trust crystallises inter vivos through communication and acceptance). Formality requirements under s 53(1)(b) LPA 1925 (declarations of trust over land must be evidenced in signed writing) and s 53(1)(c) (dispositions of equitable interests must be in signed writing) do not apply because secret trusts either operate outside these provisions or fall within the s 53(2) exception for constructive trusts.

Rochefoucauld v Boustead [1897] 1 Ch 196: Equity will not permit a statute to be used as an instrument of fraud; constructive trust imposed where defendant took land on oral promise to hold for claimant. Foundation for s 53(2) exception.

Grey v IRC [1960] AC 1: Oral direction by beneficiary to trustees to hold on new trusts is a disposition requiring signed writing under s 53(1)(c); the provision is mandatory not merely evidential. Establishes when equitable interests pass.

Vandervell v IRC [1967] 2 AC 291: Where beneficiary directs trustees to transfer legal title without declaring new trusts, equitable interest passes by operation of law (resulting trust), not disposition; s 53(1)(c) inapplicable. Distinguished from Grey on mechanism of transfer.

Ottaway v Norman [1972] Ch 698: Modern framework for fully secret trusts; ordinary civil standard applies but evidence must be clear; communication must precede death; acceptance may be inferred from acquiescence. Provides practical test for establishing secret trusts.

Blackwell v Blackwell [1929] AC 318: Leading authority on half-secret trusts; articulates dehors-the-will theory that trust is constituted inter vivos and will merely transfers property to already-bound trustees. Theoretical foundation remains influential despite criticism.

Courts apply a sequential analysis. First, classify the trust: if the will is silent, it's fully secret (communication before death suffices); if the will mentions trusteeship, it's half-secret (communication must be on/before will execution per Re Keen). Second, establish the three elements: (i) clear intention to create trust not mere moral obligation; (ii) communication of terms to intended trustee—for joint legatees, those not told take beneficially (Re Stead); (iii) acceptance, which may be express or inferred from silence if trustee knows and doesn't dissent. Third, consider formalities: secret trusts evade Wills Act s 9 but may still need to satisfy s 53(1)(b) for land unless constructive. Common triggers include: deathbed promises, provision for illegitimate children or mistresses, circumventing will publicity. The standard is balance of probabilities but courts demand cogent evidence given fraud risks. If requirements fail, fully secret trusts result in absolute gift; half-secret trusts create resulting trust to estate.

Students conflate s 53(1)(b) (evidential requirement for declaring trusts of land) with s 53(1)(c) (constitutive requirement for disposing of equitable interests)—the former can be satisfied later, the latter voids the transaction if absent. Many wrongly assume oral trusts of land are void rather than unenforceable until evidenced. The timing rule trips up candidates: half-secret trusts require communication on/before will execution, not merely before death. Don't assume total failure with multiple trustees—only those who accepted are bound. Never confuse incorporation by reference (making document part of will, subject to formalities) with secret trusts (operating outside will). Watch for mutual wills as alternative analysis where reciprocal promises exist.