Trusts & Trustees, Vol. 25, No. 8, October 2019, pp.

855–860 855

Equity as a nest: the principle-based secret

trusts
Samuel Yee Ching Leung*

Abstract The scope of the ‘prevention of fraud’ principle

The fraud theory and the dehors the will theory are
The principle governing secret trusts is preventing
generally considered as the starting points for ana-
fraud, as the House of Lords ruled in McCormick v
lysing secret trusts. However, both theories have
Grogan and Blackwell v Blackwell.1 This has been af-
been severely criticised. This article argues that the
fraud theory is defensible from a jurisprudential firmed in the judgments following those two cases.2
perspective and should be preferred. Had a ‘prin- Along with the judicial development of secret trusts,
ciple-based’ approach been adopted in the ana- the concept of fraud has been expanded as ‘a fraud on
lysis, secret trusts can indeed be justified on the the testator’,3 which is different from the concept of
basis of a legal principle—‘the prevention of fraud in common law. This concept of fraud in equity
fraud’—so that the dehors the will theory is un- triggers the court to bind a trustee as it ‘fasten[s] on
necessary. The ‘principle-based’ approach should his conscience’.4 It is a wide concept which does not
be distinguished from the ‘rule-based’ approach necessarily involve personal gain.5 Simply put, the
which is suitable for the analysis of statutes. The basis of the concept is that ‘you cannot break a prom-
‘principle-based’ approach can also reconcile ise you made with someone who has died’. Since the
fully-secret trusts and half-secret trusts. trustee has accepted responsibility, a testator has
received a promise that the secret trust will be carried
Introduction out. The testator’s guaranteed wish would be fru-
strated6 regarding any non-performance, which pro-
This article argues that ‘the prevention of fraud’ is the vides room for equity to intervene.7 The testator’s
legal principle governing secret trusts. Secret trusts perspective focuses on the effect of not carrying out
should be treated as principle-based in contrast to the promise given the testator’s reliance on the trus-
rules-based statutes. Therefore, secret trusts by their tee. Whether the trustee is an honest trustee8 does not
nature belong to constructive trusts and this renders change that reliance. It is completely the opposite of
the dehors the will theory unnecessary. This approach making a will which is unilateral and does not create
could also justify both fully-secret and half-secret any reliance. It would be an irreparable harm to fail a
trusts. dead person who has relied on the trustee9 and would

* Faculty of Laws, University College London (UCL), UK. Email: samuelleung@link.cuhk.edu.hk

1. McCormick v Grogan (1869) LR 4 HL 82 (HL), 88, 97; Blackwell v Blackwell [1929] AC 318 (HL), 336.
2. GW Allan, ‘The Secret is out There: Searching for the Legal Justification for the Doctrine of Secret Trusts Through Analysis of the Case Law’ (2011) 40
Common Law World Review 311, 314–328.
3. Cullen v Attorney General of Ireland (1866) LR 1 HL190 (HL), 198; Blackwell (n 1) 341.
4. McCormick (n 1) 88; Blackwell (n 1) 335.
5. Blackwell (n 1) 329.
6. D Hayton et al., Underhill and Hayton Law of Trusts and Trustees (19th edn, LexisNexis, 2016) 598.
7. ‘[T]he mere failure to recognize a promise may trigger the intervention of equity’. M Levenstein, Maxims of Equity (Algora Publishing, 2014) 53.
8. P Critchley, ‘Instruments of Fraud, Testamentary Dispositions, and the Doctrine of Secret Trusts’ (1999) 115 Law Quarterly Review 631, 650–651.
9. Gillett v Holt [2001] Ch 210 (CA), 228.

ß The Author(s) (2019). Published by Oxford University Press. All rights reserved. doi:10.1093/tandt/ttz079
Advance Access publication 26 August 2019
856 Articles Trusts & Trustees, Vol. 25, No. 8, October 2019

have chosen another way had he known beforehand between secret trusts and the Will Act 1837 is because
that the promise would not be carried out. The ra- the difference between their operations is overlooked.
tionale is plainly and clearly reflected along a chain of Rules are applied in an all-or-nothing manner where
judgments. they cannot contradict each other.13 However, prin-
However, this extensive meaning was fiercely at- ciples do not operate that way. Principles can be
tacked by critics. It was said that the wideness of contradictory as they, respectively, have ‘a dimension
the concept of fraud makes it undefined.10 of weights and importance’.14 Occasionally, the
However, wideness does not equal to indefinability. weight of a certain principle is heavier than others,
Arguendo, may it be imprecise, in every single case, a and hence some principles take priority over other
judge considers whether the present case falls into a principles. In a legal system, principles and rules can
particular category. Simply because judges cannot tell be and are often contradictory.15
the exact definition of a concept in advance does not Consider Riggs v Palmer16 about testamentary dis-
mean that they cannot distinguish afterwards. Take position. The legatee murdered the testator and
the concept of justice as an example. We cannot claimed the entitlement of the estate under the stat-
give an exact definition of justice, but this does not ute. However, the court rejected his claim notwith-
mean that we cannot distinguish justice from injust- standing that it was in direct conflict to the statute
ice. A series of cases may form a spectrum, and hence because a judgment in favour of the legatee would be
we reach a reflective equilibrium11 of the concept of contrary to the principles of justice. Put into the UK
fraud. The principle is hard to define a priori but context, it is almost certain that courts would have
could be determined a posteriori, through a chain of ruled the same. It is impossible to let a murderer take
interpretations.12 Judges base their reasoning on plain the estate as ‘one cannot take property by inheritance
principle(s), and through a series of applications get a or will from an ancestor or benefactor whom he has
‘silhouette’ of the principle(s) that is clear enough for murdered’.17 It perfectly shows that in certain cir-
the next round of application. Therefore, the claim cumstances, the weight of a principle can be so
that the concept of fraud is so wide as to be indefin- great as to trump a statute. Therefore, the right ques-
able should be rejected with respect. The prevention tion about secret trusts should be whether in the pre-
of fraud principle is determinable by the methodology sent case the principle of preventing fraud has enough
of a reflective equilibrium. weight to merit disregarding the statute, not whether
the statute can be disregarded in light of the principle.
Principle-based secret trusts v Rule-based Will We should bear in mind that the body of equity is
Act 1837 composed of principles, not rigid rules. Secret trusts
are not exceptions. The very purpose of equity is to
Secret trusts are governed by the principle (‘the pre- alleviate the unjust result brought by strictly applying
vention of fraud’), while statutes stand as rules. The legal rules.18 As a collection of principles, equity must
reason why it seems hard to justify the conflict be irregular like a nest. It explains why maxims in

10. ‘The fraud which the doctrine seeks to prevent is so vaguely defined [. . . and . . .] ill-defined.’ J McGhee et al., Snell’s Equity (33rd edn, Sweet & Maxwell,
2015) 662–663.
11. J Rawls, A Theory of Justice (Harvard University Press, 1971) 20. The principle could theoretically be constructed.
12. R Dworkin, Law’s Empire (Hart Publishing, 2012) 246–247.
13. R Dworkin, Taking Rights Seriously (Harvard University Press, 1978) 24–25.
14. Ibid 26.
15. ‘[M]odern legal cultures are torn in conflicting directions by irreconcilable premises’. GP Fletcher, Basic Concepts of Legal Thought (Oxford University Press,
1996) 188.
16. 115 NY 506 (1889). Interactions between principles and rules run the same way in US.
17. Ibid 513.
18. S Gallagher, Equity and Trusts in Hong Kong: Doctrines, Remedies and Institutions (Sweet & Maxwell, 2017) 6.
Trusts & Trustees, Vol. 25, No. 8, October 2019 Articles 857

Reconciling parliamentary supremacy

equity prima facie ‘can seem contradictory’.19 We
cannot allocate weights to principles simply by look- A criticism may be made that by conducting a weight-
ing at them in the abstract. The exercise can only be ing exercise between the principle of the prevention of
done if we have facts before us, which enable us to fraud and the Will Act 1837, judges offend the doc-
give weights to principles in every single case. It is a trine of parliamentary supremacy. Mr Allan claims
misconception to disregard the nature of prevention that overruling the statute may cause a constitutional
of fraud as a legal principle and to claim that ‘this is issue.25 However, the claim is based on a misinter-
obviously no valid justification for the departure from pretation of the doctrine of parliamentary supremacy.
a clear legislative intent’.20 Judges give effect to the spirit of statutes,26 not only
The judges clearly had the concept of how evidence their literal meaning. Strictly adhering to the literal
points to facts21 (which are the catalysts of allocating meaning causes problems.
weights to principles as abovementioned) despite the First, as Professor Hart profoundly stated, statutes
evolution of requirements regarding the standard of are open-texture.27 It is dangerous to prefer the literal
evidence along judgments.22 The judges determined meaning as opposed to the meaning combined with
the strength of evidence required to establish the facts legal principles. When there are hard cases28 before
that enable them to apply and accordingly give weight the court where there is no answer, or it is hard to
to the principle of preventing fraud in secret trusts.23 decide because applying the statute may give an
The weight of the principle can only be measured absurd result, judges resort to legal principles.
when judges have facts. Mr Allan cannot appreciate Inevitably, judges go beyond statutes as we see in
the mechanism of how evidence eliminates the secret trusts cases.
abstractness of the principle, claiming that the ques- Secondly, when a statute was enacted, drafters could
tion ‘regarding the standard of proof required in not have foreseen every future possibility. They may
secret trusts cases’ is ‘unnecessary’.24 Judges need to not have intended to give effect to the statute had a
ensure that there is a testator’s reliance. Not enforcing specific case brought to them beforehand.29 The con-
the secret trusts will result in the frustration of the cepts of what was actually intended and the concept of
promise between testator and trustee—a ‘fraud on the what should have been intended must be clearly dis-
testator’. The higher degree of certainty of a fraud is tinguished.30 The literal meaning of a statute does not
being done on a testator, the more willing a judge is thoroughly reflect what was actually intended by the
to enforce a secret trust. drafters as they may have been ignorant of a particular
situation that they should have been intended to create
The weight of the principle can only be mea- an exception for. One must be cautious that statutory
sured when judges have facts interpretation is a task of finding out what should have
been intended by the drafters.

19. Ibid 45.

20. E Challinor, ‘Debunking the Myth of Secret Trusts’ (2005) Conveyancer and Property Lawyer 492, 499.
21. Bannister v Bannister [1948] 2 All ER 133 (CA), 136.
22. Podmore v Gunning (1836) 7 Sim 644 (Ch), 660–661; McCormick (n 1) 97; Blackwell (n 1) 337.
23. McCormick (n 1) 97; Brown v Pourau [1995] 1 NZLR 352 (HC), 369.
24. Allan (n 2) 324–325, 327.
25. Ibid 328–330.
26. Professor Ekins stated that ‘[i]t is unsound for interpreters to take ‘‘the statutory purpose’’, detached from the full chain of reasoning on which the legislature
acted.’ (R Ekins, The Nature of Legislative Intent (Oxford University Press, 2012) 251.) I use the term ‘spirit’ following Blackwell (n 1) 336.
27. HLA Hart, The Concept of Law (2nd edn, Oxford University Press, 2012) 126–130.
28. Dworkin (n 13) Chapter 4. Judges must give weights to legal principles and considerations to arrive at a result (ibid 118).
29. ‘[P]resumptions of intent serve only [. . .] assist in clarifying the content of Parliament’s instructions when [. . .] the legislators’ intentions have not been
transparently conveyed.’ TRS Allan, The Sovereignty of Law (Oxford University Press, 2013) 173.
30. R Dworkin, A Matter of Principle (Oxford University Press, 2001) 20–21.
858 Articles Trusts & Trustees, Vol. 25, No. 8, October 2019

Thirdly, there may be a boundary that even statutes reliance, which then triggers the application of the
cannot cross.31 As Sir Edward Coke, by virtue of Dr principle.
Bonham’s case,32 was said to claim that courts should Therefore, it is unhelpful to look simply at the re-
have ‘the large power of equitable construction, to sults of the judgments to conclude that the majority
avoid consequences that Parliament could not have of the judgments are consistent while others are in-
intended, or to modify provisions that were nonsens- consistent. When a secret trust was not enforced, it
ical, self-contradictory, or otherwise impossible to was simply because the facts in that particular case, as
apply’.33 Parliamentary supremacy is not founded established by evidence, did not show that there was a
on absolute power that demands strict compliance. fraud on the testator. In turn, judges were not able to
A better view is that the parliament is not bound by give enough weight to the principle to outweigh the
its predecessor.34 The parliament has the freedom to force of the Will Act 1837. The principle is always the
amend the law by enacting new statutes. It can over- same—the prevention of fraud. The principle behind
rule judgments by ‘relegislation’ had the parliament and the juridical reasoning are indeed coherent. One
disagreed with judges.35 However, since the beginning cannot look at the result and neglect the mechanism
of secret trusts in Thynn v Thynn,36 more than behind it. The right perspective is therefore not
300 years have passed, but parliament has chosen whether the results of the judgments are consistent
not to intervene. Parliament has implicitly consented but whether the principles used to reach the judg-
to judges’ interpretation of the interaction between ments are coherent.
prevention of fraud principle and the Will Act 1837.
Therefore, to consider secret trusts as contrary to par- The right perspective is therefore not whether
liamentary intention is itself neglecting the implied the results of the judgments are consistent but
parliamentary intention. whether the principles used to reach the judg-
ments are coherent
Secret trusts as constructive trusts
Categorising secret trusts as constructive trusts ex-
Since secret trusts are principle based, its validity plain why the statutory formality need not be followed.
comes from the application of the principle, not It puts aside the problem of the transfer of land.39 The
from compliance with certain formalities. Secret validity of secret trusts depends on the operation of
trusts must be by nature constructive trusts rather law, not formality. This categorisation is in line with
than, as proposed in Lewin,37 express trusts. Its Brown,40 and squarely fits into the principles of the law
effect comes from the operation of law which is a of trusts made by Lord Browne-Wilkinson in a land-
judicial exercise. The three conditions, namely, inten- mark case in the history of equity:
tion of the testator, communication to the trustee,
and acceptance of the trustee38 are not formalities Equity operates on the conscience of the owner of the
but the prerequisites for inferring the testator’s legal interest [. . .] [T]he conscience of the legal owner

31. ‘[T]here exists a higher plane of legal principle, given concrete meaning and effect in the common law, which serves to place inherent limits on the legislative
power of Parliament.’ M Gordon, Parliamentary Sovereignty in the UK Constitution (Hart Publishing, 2015) 128.
32. (1610) 8 Co. Rep. 107 (CtCP).
33. J Goldsworthy, The Sovereignty of Parliament (Oxford University Press, 2002) 111 (Emphasis added).
34. L Green et al., Oxford Studies in Philosophy of Law (Oxford University Press, 2011) 167.
35. ‘[T]he courts determine the legal effect of Acts of Parliament but Parliament may always relegislate to overrule the courts, subject again to the courts’
determining the legal effects of the relegislation’ (Ibid 166–167).
36. (1684) 1 Vern 296 (KB).
37. L Tucker et al., Lewin on Trusts (19th edn, Sweet & Maxwell, 2015) 94–95.
38. Blackwell (n 1) 334; Tucker ibid 95–98.
39. McGhee (n 10) footnote 144 of 663, where Re Baillie (1886) 2 TLR 660 (HC) ruled that the ‘lack of writing may prevent enforceability of unwritten secret
trusts of land’ in contrast to Ottaway v Norman [1972] Ch 699 (Ch) where an ‘unwritten secret trusts of land upheld’.
40. Brown (n 23) 368.
Trusts & Trustees, Vol. 25, No. 8, October 2019 Articles 859

requires him to carry out the purposes for which the immediately needs to transfer the property to the
property was vested in him (express or implied trust) beneficiary due to the secret trust. The operations of
or which the law imposes on him by reason of his the will and the secret trust are under a chronological
unconscionable conduct (constructive trust).41 sequence. The secret trust cannot be enforced before
the effect of the will.
It links back to the central concept of conscience In terms of operation and time, the dehors the will
which is the source of the prevention of fraud theory is not pointing to the central question—
principle. whether the prevention of fraud principle has
Under this principle-based approach, the classifica- gained enough weight to take priority over the Will
tion question of whether the constructive trust upheld Act 1837. The fraud theory is to be preferred since it
is a testamentary disposition (governed by the Will suffices in explaining the enforcement of secret trusts.
Act 1837) or an inter vivos transaction (governed by
the Law of Property Act 1925)42 becomes irrelevant Reconciling fully secret trusts and half-secret
and unimportant. Even if it is prima facie a testament- trusts
ary disposition,43 the legal principle of prevention of
fraud takes priority and triggers the operation of a Under the principle-based approach, fully and half-
constructive trust afterwards. secret trusts could be reconciled by notwithstanding
the additional communication requirement.
Responding to the dehors the will theory The Will Act 1837 disallows any other forms of
testamentary disposition.47 One obvious reason is
Under the dehors the will theory, the true meaning of that everything in the will must be determined and
‘outside the will’44 could be read differently in our crystalized at the time when it is executed. Even in the
principle-based approach. After judges have made case of incorporation of documents, the documents
the determination that the prevention of fraud prin- need to exist before the execution of the will.48 The
ciple should take priority over the Will Act 1837, the spirit of the Will Act 1837 is to have everything in the
Act simply has no role to play regarding the secret will settled in avoidance of any uncertainty.
trust since the rule applies in an all-not-nothing Regarding half-secret trusts, it exists by virtue of the
manner and it therefore should be neglected when it will as the existence of the beneficiary is in the will.
has been outweighed. The principle suggests that the Therefore, assuming the communication requirement
rule is inapplicable in the present case. The operation is loosened, it would directly contradict the spirit of
of the constructive trust leaves no room for the ap- the Will Act 1837 and destroy the certainty within the
plication of the legal rule. Hence, logically, the con- will. The judge in Blackwell clearly was aware of this as
structive trust must be outside the will. he ruled that ‘testator cannot reserve to himself a
Also, as stated in McCormick45 and Blackwell,46 the power of making future unwitnessed dispositions by
operation of secret trusts is, in time, after the will. The merely naming a trustee and leaving the purposes of
trustee obtained the property by virtue of the will and the trust to be supplied afterwards’.49 In the name of

41. Westdeutsche Landesbank v Islington London Borough Council [1996] AC 669 (HL), 705 (Emphasis added). Notwithstanding that the case is not dealing with
secret trusts, the principles regarding trusts must be coherent.
42. Hayton (n 6) 358.
43. Critchley (n 8) 641.
44. Cullen (n 3) 196; Blackwell (n 1) 334; Re Young [1951] Ch 344 (Ch), 350; Re Snowden [1979] Ch 528 (Ch), 535.
45. McCormick (n 1) 88.
46. Blackwell (n 1) 334.
47. Ibid 337.
48. Tucker (n 37) 89.
49. Blackwell (n 1) 339.
860 Articles Trusts & Trustees, Vol. 25, No. 8, October 2019

the prevention of fraud, principle alone is insufficient In contrast, the existence of fully secret trusts is
to directly contradict50 the Will Act 1837, during the totally out of the will. Although secret trusts operate
time span of its effect within the will, to prima facie as constructive trusts afterwards, a will stands alone.
deal with the testamentary disposition and invent an To enforce a fully secret trust is simply a matter of
uncertainty in the will—a consequence that the Will how much weight should be given to the principle to
Act 1837 is trying to avoid as the certainty within a operate a constructive trust after the will which is
will must be preserved. Since no other valid prin- irrelevant to the content in the will.
ciple(s) could be observed, judges cannot by simply
relying on one legal principle disregard the spirit of Conclusion
the Will Act 1837 in preserving the certainty within a
will during its effective time span. To respect the spirit Under a principle-based approach, the fraud theory is
of the Will Act 1837, judges had to give one more preferable to the dehors the will theory in reconciling
restriction not to affect the stability within a will, but secret trusts with the Will Act 1837. Equity is like a
only operate a constructive trust after the will. The nest composed of a mess of self-conflicting principles
communication requirement serves as a balance that conflict with the rules but nonetheless work perfectly
struck between paying respect to the statute by avoid- well. When jurisprudential and constitutional views are
ing direct conflict without a valid principle and giving taken into account, a high degree of coherence is demon-
effect to the prevention of fraud principle after the strated in both fully secret and half-secret trusts, and the
will. doctrine fits squarely into our judicial reasoning.

Samuel Yee Ching Leung is a Master of Laws candidate at the Faculty of Laws of University College London. He
holds a Juris Doctor (Dean’s List) from the Chinese University of Hong Kong (CUHK) and a Bachelor of
Business Administration (Honours) from the Hong Kong Baptist University. He was a researcher and
Consultant of the Vis Moot team at CUHK and has been awarded various moot prizes. E-mail:
samuelleung@link.cuhk.edu.hk

50. Since the existence of the beneficiary is mentioned in the will.

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