What is the true purpose of enforcing secret trust?

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02/02/18 Free Law Essays Reference this

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What is the true purpose of enforcing secret trust?

Formalities of testamentary trust are contained in Wills Act 1837 and it is very high formality and essentially it is to make sure that the evidence we have of the testator is genuine. According to section 9 of the Wills Act 1837 “No will shall be valid unless it is in writing, signed by the testator and attested by two witnesses”. [1] 

Secret trust is defined as the exception of the formalities of the testamentary disposition. Here formality requirement of the Wills Act do not apply [2] 

There are two types of secret trust one is full secret trust (FST) and another is half secret trust (HST). In full secret trust on the face of the it appears to be an absolute gift but the legatee informally agree with the testator before his death to hold on trust for another.

Half secret trust is one which the existance of the trust is apparent on the face of the will but the terms of the trust are not disclosed.

Here effective communication is essential because without it the trust will be failed for want of object. [3] 

Secret trust is enforced not under the will but because of the previous deal. The whole basis of secret trust as I understand they operate outside the will which is known as dehors theory, changing nothing that is written in it and allowing it to operate according to its tenor but then fastening a trust to the property in the hands of the recipient. These whole process is going not under the law but under the equitable jurisdiction. So these trust is enforced for two theories one is dehors theory and another is fraud theory.

My submission is that the doctrine of secret trust was first applied as a valid use of the courts equitable jurisdiction but its continued existence, divorce from its original function and context.

The theory postulates three distinct stages that is the validity of secret trust depends on intention of the testator, communication of the terms and acceptance of terms by legatee but the trust remains incompletely constituted until the property is vested in the trustee upon the death of the testator. The theory claims that secret trusts are governed by the law of trusts and not that of Will, and yet these trusts involve a departure from the usual rules attached to trusts. For in upholding secret trusts, the courts are allowing trusts to bind after-acquired property, and under the normal rules of trusts it is impossible to declare an immediate trust of future property.

Many modern commentators refute the argument that the courts, in upholding secret trusts, are turn aside from this policy, by arguing that secret trusts operate outside of this act. Patricia Critchley has challenged this basis for upholding fully secret trust, submitting that fully secret trust are testamentary dispositions and such governed by the Wills Act1837. Her conclusion is that the dehors theory seems to be fatally spoiled, the mistake being to confuse “outside the will” with “outside the Wills Act”. In Blackwell V Blackwell, Viscount Sumner said “ I do not see how the statute law relating to the form of a valid Will is concerned at all” [4] 

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The Statute of Fraud 1677, were designed to prevent fraud and the legatee who took on the basis that he was a trustee but who later relied on the statute to take absolutely, would be using the statute as an engine of fraud. [5] 

In fully-secret trusts, except the evidence of the trust is admitted contrary to the provisions of the Wills Act, the intended trustee will be able to take the property beneficially and will profit from his own unprofessional behaviour, so this justification for the enforcement of these trusts on this basis does seem legal. Here equity would be acting in a way with which we are well known in other areas of the law, such as in Rochefouchauld v Boustead.

However, this original and confined idea of the “fraud theory” does not “explain the existence of half-secret trusts. In half secret trust in the face of the will it is clear that there is a trust and it is not possible for the trustee to get the benefit of that trust but he may say the world that this trust is for his mistress or relative. So a general fraud may commited upon the testator and the beneficiaries by reason of the failure to observe the intention of the testator.

None of the above theories therefore provide a satisfactory and consistent rationale for the enforcement of the secret trust. NO coherrent theory, no logic no golden thread link the cases. Enforcement of the secret trust is a matter of policy relating to testamentary disposition. IN practis judjes solve the problems of each caseaccording to the needs of the parties and to do justice using the established law of secret trust.

I would disagree, arguing that these reasons are not sufficient to demand the continued existence of secret trusts. There ismuch to be said for an abolition, or at least a fundamental revision, of the law relating to them, as the law is confused, and justifications for the distinctions between the two types of secret trusts are difficult to find. They serve a very limited social purposeand fraud would be better prevented by an insistence upon compliance with the requirements of the Wills Act.

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