WHAT IS SECRET TRUST?

WHY?
an arrangement between a testator and a trustee to benefit a person
without having to specify that person in a will
made to come into force after death as he will instruct the trustee to
distribute the trust after his death
that aims to benefit a person without having been written in a formal
will
the testator wish the identity of the beneficiary to remain secret
he may simply not have made up his mind at the time of making the
will relating details of all the dispositions

TWO TYPES OF SECRET

TRUST
(1) Fully Secret Trusts
is the one with no mention in
the will
example : A can leave property
by will to B, (complies with the
provision of the Act) but having
come to an (unwritten)
understanding that B is merely
trustee of it in favour of C.

(2) Half Secret Trusts

the face of the will names the
trustee as trustee, but does not
give the trust's terms including
the beneficiary
example : A can leave
property by a valid will to B on
trust, but where the beneficial
interest under the trust (for
example, in favour of C) is
undeclared.

HOW SECRET TRUST WORKS?

secret trusts do not comply with the formality
requirements (such as witnessing) laid down in the
Wills Act 1837
section 9 of the Wills Act 1837 stated that will have
to be made in writing, and properly signed and
witnessed
its purpose is to prevent fraud.

 If provisions of section 9 are not complied with, the will

is completely void and any trusts which it purports to
create will be invalid
However a secret or half secret trust may take effect on
the death of the testator without any need to specify the
terms of the trust to reveal its existence
Formalities can sometimes encourage fraud
"EQUITY WILL NOT PERMIT A STATUTE T0 BE
USED AS A CLOAK FOR FRAUD"
The doctrine of secret and half secret trust have evolved
to prevent this.

DIFFERENCE BETWEEN FULL

SECRET TRUST & HALF SECRET
TRUST?
The most important difference lies in

communication of the trust.

Half-secret trust : The terms must be communicated
to the trustee before the execution of the will
Full secret trust : The terms may be communicated
after the execution of the will, as long as this is before
the testator's death.

Half Secret Trust

The testator indicates in his will that the recipient
of the bequest is not intended to take the property
absolutely but as a trustee
The identity of the ultimate beneficiary remain
concealed
The beneficiary in the will be seen as a secret
trustee

Requirements:
1. Intention
2. Communication
3. Acceptance

Evidence -> enforceable - oral/written

An expression of a mere hope or precatory words is
not sufficient.
RE Clause
SNOWDEN
[1979}
Allto ER
172,
10 left Port Dickson
holiday villa
Mark for
the purpose I will communicate to him
the deceased left property to her brother in the hope
that he would do with it what he thought she would
have wanted.This was held not to be sufficient to
give a clear indication of intention to set up a trust.
1) INTENTION- FULFILLED MENTIONED IN THE WILL
8

Communication made before the execution

of the will, evidence will not be admissible if
communication inconsistent with the face of
the will
RE KEEN
Testator left 10,000 to two trustees to be held upon trust
and disposed of them among such person, persons or
charities as may be notified by me to them during my
lifetime
Prior to this one of the trustee had been given a sealed
envelope with the name of intended beneficiary
Ct: Not a valid trust as the letter was inadmissible and
unattested
Inconsistent with will
9

THE LETTER WRITTEN

BY MARK
2) COMMUNICATION
A week later he wrote by registered post to
Mark directing him to hold the villa on trust for
Chengs only daughter, Ying, who is 15 years
old
ISSUE OF INCONSISTENT WITH THE WILL?
No issue BUT A week later -> AFTER
WILL EXECUTED
COMMUNICATION- NOT FULFILLED
10

Cheng -> Mark -> Ying

[villa]

(3) ACCEPTANCE FULFILLED : MARK

CALLED CHENG & ACKNOWLEDGE
ACCEPTANCE OF LETTER
WALLGRAVE V TEBBS :
ACCEPTANCE TO CARRY OUT THE
SECRET TRUST MAY BE EXPRESS OR
IMPLIED

CONCLUSION : The half-secret

trust is not valid
2nd element not fulfilled communication only
after the execution of will
Effect : Secret trust fails the villa revert back to
Chengs estate on resulting trust - Lilly might be
entitled to the villa under rules of intestacy as
Chengs wife.
Re Boyce : The secret trustee would be required
to hold the property on resulting trust for the
settlors residuary estate

2) Whether the secret trust hold

by James for the benefit of Ms Yen
and her daughter was valid?
Full secret trust:
1. A testator bequeths property to a
specified person in his will who has
agreed that he will hold the property
left to him on trust for a third party.
2. Fact of the trust and identity of the
beneficiary are not revealed.

13

Blackwell v Blackwell
(1929) AC 318
Dicta of Viscount Sumner:
The necessary elements. . . are
intention,
communication
and
acquiscence. The testator intends his
absolute gift to be employed as he and
not as the donee desires; he tells the
proposed donee of his intention and ,
either by express promise or by tacit
promise,
which
is
signified
by
acquiscence,
the
proposed
donee
encourages him to bequeath the money
14

Requirements:
1. Intention
2. Communication
3. Acceptance

15

Intention
i)Need to illustrate sufficient certainty of intention.
ii)Need to show that the testator intended to subject the
secret trustee (primary donee) to a mandatory obligation
to hold property for the benefit of secret beneficiary
(secondary donee).
Case: Ottoway v Norman
Brightman J held on the facts of the case that a secret
trust devise applied to the testators bungalow, furniture,
fixtures and fittings but not to money devised to the
testators housekeeper since there was insufficient
evidence of the testators intention that she was not to
keep the money
16

It has been summarised:

This requirement is no different from the requirement that
conventional express trust must demostrate sufficient
certainty of intention to create a trust. It must be shown
that the testator intended to subject the secret trustee to a
mandatory obligation to hold the property for the benefit of the
secret beneficiary. An intention to impose a purely moral
obligation is insufficient

Application:
Cheng invited James to dinner and delivered the portable
storage device to him. On top of that, Cheng effectuate his
intention by placing the code of the device to his lawyers and
inform James on this. Thus, there is a strong intention that can
be infer from Cheng to have the trust to be valid.
17

Communication
Principle:
1. Communication can be effected at any time during the
life of the testator, either before or after the execution
of the will ( Moss v Cooper)
2. Equally effective if the testator were to hand to the
trustee a sealed envelope containing the term of the
trust, and instructed the trustee not to open the same
until after the death of the testator.(Re Keen)
3. The communication must identify the property to be
held on trust, and the identity of the secret beneficiary
or the means to discover the same( Re Boyes)

18

Application:
There is a valid full secret trust because Cheng pass the
portable storage device to James before his death and in
fact the code was sealed in envelope and James can only
know about the code after Chengs death. Therefore, there
is effective communication between Cheng and James to
inform the trust made for the benefit of Ms Yen and her
daughter

19

Acceptance
The secret trustee is only bound by the
trust if he has accepted to hold the same on
trust.
Intended trustee accepted that he would
hold it on trust.
Wallgrave v Tebbs, court held that a
claim founded on secret trust failed because
the devisees knew nothing of the testators
intention until after his death.
20

Acceptance by trustee could either be express or

as a mater of inference.
Dicta of WOOD VC in case of Wallgrave v Tebbs:
Where a person, knowing that a testator is
making a disposition in his favour intending it to be
applied for purposes other than his own benefit,
either
expressly promises, or by silence implies,
that he will carry the testator's intention into effect,
and the property is left to him upon the faith of that
promise or undertaking, is in fact a case of trust

21

Application:
The fact that when Cheng invited
James to dinner, informed him the
legacy of RM 100,000 under the will
for someone special and received
the portable electronic storage
device from Cheng showed that the
he accepted to become the trustee.
This shows express acceptance on
part of James.
22

CONCLUSION FOR
SECOND ISSUE
The 3 condition of a valid full secret trust are fulfilled:
a. Intention: Cheng invited James to dinner and
delivered the device to him,
b. Communication : must be made before the death
of testator, he handed the device to James,
c. Acceptance : express acceptance when James not
refuse when received the device and carried out the
trust after the death
Thus, the full secret trust given to James to hold RM
100,000 on behalf of Ms Yen and Chi Chi is valid.

23