The Right to Secret Protection of Dependants Under the Nigerian Law of Trust

ABSTRACT

The right to secret protection of dependants under the Nigerian law of trust is engrossed in the right to create a secret trust, which, notwithstanding its noncompliance with strict statutory provisions, is recognised and enforced by the court upon the fulfilment of certain conditions.

This enforcement protrudes from the equitable maxim that, ‘Equity will not permit a statute to be used as an instrument of fraud,’ which compels a promisor (the trustee) to fulfil his promise even though not documented as required by statute. Or in more recent views, that the secret trust exists ‘dehors the will’ i.e. outside the will.

Beginning from the very nature of trust and its undeniable rise in the English legal framework, this paper looks into the intricacies of an express private trust, towards the making of the testamentary instrument which engenders the creation of the secret trust (whether fully or half secret) for the protection of beneficiaries, particularly dependants such as illegitimate children and mistresses.

Introduction

The Nigerian Law of Trust, like many other areas of law in Nigeria, is tailored after the English law through various statutory enactments.[1] Therefore, reliance must be made on the Received English Law to distill what obtains in relation to Trust in the Nigerian legal framework. This includes the Common law, Doctrines of Equity, as well as Statues of General Application (SOGA) that were in force in England on the 1st of January, 1900.

Trust Definition and Meaning

A trust creates an equitable obligation on the holder of a property for the benefit of another (or in case of a public trust, for a charitable purpose). Believed to have arisen from dealings in relation to land between owners and users, Maitland[2] regarded the development of trust as “the greatest and most distinctive achievement performed by Englishmen in the field of jurisprudence.”[3] Trust has been widely defined by various authors and jurists. But as Underhill expressed, “no definition of a trust appears to have been accepted as both comprehensive and exact.”[4] This is observably the same across various concepts in different areas of law.

According to Underhill, “A trust is an equitable obligation, binding a person (who is called a trustee) to deal with property over which he has control (which is called the trust property), for the benefit of persons (who are called beneficiaries or cestuis que trust), of whom he may himself be one, and any one of whom may enforce the obligation.”[5]

However, the definition by Professor Keeton is fairly satisfactory, having captured the major and most significant features of a trust. According to Keeton, “A Trust… is the relationship which arises where a person called the trustee is compelled in Equity to hold property, whether real or personal, and whether by legal or equitable title for the benefit of some persons (of whom he may be one and who are termed beneficiaries) or for some object permitted by law, in such a way that the real benefit of the property accrues, not to the trustee, but to the beneficiaries or other objects of the trust.”

In the case of Anthony Ibekwe V. Oliver Nwosu,[6] A. Fabiyi, J.S.C. stated that, “Trust, simpliciter, is the right enforceable solely in equity to the beneficial enjoyment of property to which another person holds the legal title. It is a property interest held by one person (the trustee) at the request of another (the settlor) for the benefit of a third party (the beneficiary). For a trust to be valid, it must involve specific property. Certainty of subject matter is an important element in trust. It should reflect the settlor’s intent and be created for a lawful purpose.”

Clearly, the three parties comprised in a trust are the trust-creator (or settlor), the trustee (which holds the trust property), and the beneficiary (for the benefit of whom the trust was made). Also, the concept of trust creates two simultaneous interests in the same property. The trustee has a legal interest, while the beneficiary holds an equitable interest in the property.

It is also important to state that trust is different from other legal concepts like power[7], contract, debt[8], agency, corporation, bailment, etc.

Trust for Dependants

Beginning at the origin of trust, many reasons can be given for the rising and acceptance of the equitable concept. As Hudson postulates, the time of the early wars fought in the 12th century when Christian noblemen from Europe travelled to the Middle East on crusades and still had their lands tendered in their absence without abrogating their rights through the creation of split ownership of the land, whereby the person left in charge had legal ownership and the crusaders were still able to recover all their rights upon return from the war. Consequently, the crusader was treated as the owner of the land by the courts of equity and the person left in charge was taken as the legal owner at common law.[9]

In modern times, the use of trust has gained significant increase for importantly identifiable reasons. Whether in setting up a pension scheme[10], or to provide security for lenders of money[11], for retention of title, charity, or for provision for minors, family and dependants.

Dependants are persons who materially depend on someone else for financial support. This may include children, aged parents, incapacitated individuals, less privileged persons, and other intended too be catered for, who require resources for health, maintenance, support, education etc.[12]  The trust system creates an undoubtedly effective way of catering for these dependants. Apart from the renown after-death provision created by a testator, trust can be used to schedule provision for dependants over a long period of time on specified timestamps. Thus, instead of bequeathing an entire estate or lump sum to a dependant who might be subject to fraud or frivolous spending habits, the trust system can make the estate or money available in stages (e.g. age or educational qualification).

Trust for children may be created as a bare trust, nominee accounts, or discretionary trust.[13] Creating a trust for dependants become exclusively sensitive when the identities of these dependants are best kept out of public knowledge. For example, where the beneficiary is an illegitimate child or mistress. To this end, the settlor or testator employs his right to create an utmost confidential arrangement offering secret protection through a secret trust.

Nature of Forms of Trusts

Generally, in classification as to type of beneficiary, a trust may be private or public. Private trusts are created for the benefit of a single person or specified class of persons. Most of the other forms of trust are private in nature. Public trust, on the other hand, is set up to cater for the welfare of the public at large or at least a section of it. The commonest example of a public trust is charitable trust.

As to its method of creation, a private trust can be express, implied or constructive. In an express trust, the intention of the settlor to create a trust exists unmistakably. That is, the trust-creator declares himself or another as a trustee in whom a property is vested for the benefit of yet another person. Thus,  all the parties and certainties[14] of a trust are clearly seen. An implied trust, however, is presumed from the actions of the settlor by operation of law. While constructive trusts are imposed by the court as a response to fraudulent or unconscionable conduct, irrespective of the intention of a trustee. 

Express Private Trust

In relation to its mode of operation, an express private trust may be living or testamentary. A living trust, also known as inter vivos trust is a trust that is created by a settlor or grantor during their lifetime to protect their assets and direct their distribution after the grantor’s death.[15]

Living trust

An inter vivos trust is created by a legal document which states the terms of the trust, the subject or property involved, as well as a trustee to hold the assets for the benefit of the beneficiaries. A living trust “owns” the property put into it, while often still letting the grantor control the trust assets. Then, when they pass away, the assets in the trust will pass on to the people intended to receive them.

Testamentary Trust

A TESTAMENTARY TRUST is also known as a will trust. It is outlined within the testator’s last will and testament. The significant difference between this and a living trust is that a testamentary trust is not established until the property is settled at the death of the testator. In other words, the trustee does not assume a legal ownership of the trust property, neither does the object gain an equitable ownership, until the death of the testator. Unlike a living trust therefore, a testamentary trust becomes irrevocable once it is established. However, before the death of the testator, it remains ambulatory.

An important feature of the testamentary trust, which might as well be regarded as a disadvantage, is that it is subject to probate. The probate is a court process by which the court affirms that the document in question is the last will and testament of the deceased. If the will is not affirmed, the asset of the deceased cannot be distributed. And since the trust was made as part of the will of the deceased, whatever affects the will affects the trust.

Another significant resulting effect of this process is that through probate the will becomes public record. Thus, anyone can go to the court clerk to request a copy. All information about the testator’s assets and how they are to be distributed can be accessed by anyone.[16] However, with the SECRET TRUST system, a testamentary trust can be created for an undisclosed beneficiary, to protect the dependant, who takes dehors (outside) the will.

Essential Features of Express Private Trusts

The statute governing the creation of trust in Nigeria are the statute of fraud 1677[17] and the Property and Coveyancing Law,[18] The Wills Act 1837 and The Wills Law.[19][20] The formalities for the creation of express trusts are clearly stated in these statutes and can be summarised on the note that the trust must be in writing.

For instance, Section 7 of the Statute of Frauds provides:

“All declaration or creation of trusts or conveyance of any land, tenements or hereditaments, shall be manifested and proved by some writing signed by the party who is by law enabled to declare such trust or by his last will in writing or else shall be utterly void and of no effect.”

Also, section 9 of the same statute provides:

“All grants and assignments of any trust or conveyances shall likewise be in writing, signed by the party granting or assigning the same or by such last will or devise or else shall be void and of no effect.”

Section 78 (1)(b) of the Property and Conveyancing Law, mandating a similar requirement, provides, “A declaration of trust respecting any land of any interest therein must be manifested and proved by some writing signed by some persons who is able to declare such trust or by his last will.”

As to TESTAMENTARY operations, Section 9 of the Wills Act 1837 provides:

“No will shall be valid unless it shall be in writing and executed in manner, hereinafter mentioned (that is to say) it shall be signed at the foot or end thereof by the testator, or by some other person in his presence and by his direction …”

EQUITY WILL NOT PERMIT A STATUTE TO BE USED AS AN INSTRUMENT OF FRAUD

As hereinbefore considered, the Wills Act mandates the disposition of property by the will to be in writing. This would also necessarily affect every other conveyance under the will including the testamentary trust. However, this does not abrogate the RIGHT TO SECRET PROTECTION of dependants in a secret trust.

Secret Trust [21]

A secret trust is a testamentary trust with an undisclosed object. In other words, this is a trust that appears in the will but which does not disclose the identity of the beneficiary.[22] The doctrine of secret trust is a product of equity not allowing statutes to be used as an instrument of fraud.[23] In this kind of trust, X makes a testamentary trust in his will, but does not disclose the object of the trust. A trust may or may not be seen on the face of the will. By its very nature, secret trust is used to provide for special dependants like illegitimate children and mistresses whose identities are intended to be kept from public record. Flowing from the foregoing therefore, this form of trust constitutes an exception to Section 9 Wills Act 1837[24] and Section 6 Wills Law. 

Secret trust may be of two forms, namely: Fully Secret Trust and Half Secret Trust. The main differences between these two forms of Secret trust are seen in their constitution, implication, and mode of operation.

Fully Secret Trust

This form of Secret trust is constituted with a gift that appears beneficial. Thus, in a fully secret trust there is no reference whatsoever to the existence of a trust. Written in a will, it may be simply put as, “I give Tola #100,000.” No suggestion is made as to what the gift is for.

Therefore, in a fully secret trust, the trustee might take beneficially. The wild risk is undeniable in the creation of such trust. Failure to communicate the identity of the beneficiary to the donee before the death of the testator will result in the donee taking beneficially. The donee will also take beneficially if he does not promise to hold the property for the benefit of the secret beneficiary.[25]

In creating a fully secret trust for the protection of dependants, three essential requirements must be met. First, the intention of the testator must be that the donee hold the property for another. Second, the intention must be communicated to the donee before the gift takes effect, i.e. before the death of the testator. And thirdly, the donee must accept the trust. This acceptance may be implied by silence. 

Communication and acceptance must be of a definite obligation, not of a mere hope or confidence expressed by the testator.[26] Nevertheless, it may be made by handling the donee a sealed envelope containing the terms of the trust which he is enjoined not to open until the testator is deceased; Re Keen.[27]

Half Secret Trust

Like Equity to Common law, half secret trust mitigates the harshness and amends the inadequacies of the fully secret trust. Under this kind of secret trust, the dependant or beneficiary is yet without disclosure, but it is obvious that a trust has been created on the face of the Will. It may be written as giving X a property to hold in trust on the terms that shall be communicated to him.

Unlike in a fully secret trust, half secret trust prima facie appearance makes fraud unlikely. It becomes impossible for the donee to take beneficially. If no communication is made concerning the identity of the benefiary before the testator is deceased, then the property results to the testator’s estate; Re Keen, infra.

Another striking difference between the fully secret and half secret trust is that in the later, the communication and acceptance of trust must take place before or at the time of making the will and the will must indicate clearly that such communication has already been made. This is highlighted by the House of Lords in Blackwell v. Blackwell,[28] a leading case for half secret trust.

In Blackwell v. Blackwell, the testator instructed his trustees in his will to use the income ‘for the purposes indicated by me to them’ and pay up to the capital ‘to such person or persons indicated by me’. He told the trustees orally before the execution of the will that the money should go to his mistress and his illegitimate son. His widow and legitimate son, however, challenged the validity of the trust and claimed the money.[29] Vicscount Sommer held that:

“A testator cannot reserve to himself a power of making future unwitnessed dispositions by merely naming a trustee and leaving the purposes of the trust to be supplied afterwards, nor can a legatee give testamentary validity to an unexecuted codicil by accepting an indefinite trust, never communicated to him in the testator’s life time.”

Dehors the Will

In more recent times, in the protection of the enforcement of secret trusts, it has been observed that secret trust is not a departure from the requirements of the Wills Act, since it operates dehors the will, i.e. outside the will.

This adds another layer to the right to secret protection of dependants under the Nigerian law of trust, by stating that equity will compel a promisor, who has promised to hold a property for the benefit of another, to keep his promise. This is elaborated in the dictum of Megary V.C. in Re Snowden deceased,[30] that:

“The whole basis of secret trusts … is that they operate outside the will, changing nothing that is written in it, and allowing it to operate according to its tenor, but then fastening a trust on the property in the hands of the recipient.”

The theory has also been applied in Cullen v Attornay-General for Ireland,[31] as well as in Re Young.[32]

In this sense, secret trust seemingly operates as both inter vivos and testamentary. And unlike as in incorporation by reference, secret trust does not form part of the will. Thus, by the operation of a secret trust, there is a secret protection of dependants under the Nigerian law of trust.

Conclusion

From the private express trust to testamentary trust and to secret trust, the right to secret protection of dependants is recognised under the Nigerian law of trust, tailored after the English law. Through a secret trust, whether fully or half secret, the identity of a beneficiary can be protected from public record.

This is, however, subject to the fulfilment of certain requirements, particularly relating to communication and acceptance between the testator and the trustee. Where these demands are met, the secret trust is set up and enforced by the court, though exceptional to the provisions of the Wills Act or as existing dehors the will. In either case, the right to secret protection of dependants, including illegitimate children and mistresses, is preserved.

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[1]     Section (S.) 45 Interpretation Act Cap 89, 1958 Laws of Nigeria; S. 14, High Court Law of Eastern Nigeria, Cap 61, Laws of Eastern Nigeria 1963; S. 28 High Court of Northern Nigeria, Cap 49 Laws of Northern Nigeria 1963; S. 4 Laws of England (Application) Law (W.N) Cap 60 Laws of Western Nigeria 1959.

[2]     Maitland Equity (Brunyate Ed. 1949).

[3]     Hudson, A., Equity & Trusts, 4th ed., (Cavendish Publishing Ltd, London, 2005) 35.

[4]     Underhill’s Law of Trusts and Trustee (11th Ed.) 1959 p.3

[5]     Underhill’s Law of Trusts, 13th ed., p. 1

[6]     (2011) 9 NWLR (Pt. 1251) 1

[7]     In Re Manistry’s settlement [1974] 1 Ch 17, Chancery Division, the power to extend the class of beneficiaries was valid even though tainted with uncertainty. The essentials of a trust are certainties.

[8]     Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567

[9]     Ibid, at 35-36; Also, Hudson A., Understanding Equity & Trusts, 2nd ed. (Cavendish Publishing, London, 2004) 13.

[10]   McPhil v Dulton [1970] 2 All ER 228 is a case concerned with pension trust, in which the House of Lords reviewed the certainty tests.

[11]   In Barclayss Bank v Quistclose Investment Ltd (1968) 3 All ER 651, the court held that it is possible to have a loan and a trust existing side by side.

[12]   FBNquest Dependent Trust: available at https://fbnquest.com/dependent-trust/ (accessed on 26th April, 2023).

[13]   PARTNERS Trusts for children explained: available at https://www.evelyn.com/insights-and-events/insights/trusts-for-children-explained/ (accessed on 26th April, 2023)

[14]   As to intention, subject matter, and object.

[15]   Investopedia What Is a Living Trust?: available at https://www.investopedia.com/terms/l/living-trust.asp (accessed on 26th April, 2023)

[16]   FREEWILL Are wills public record?: available at https://www.freewill.com/learn/are-wills-public-record (accessed on 26th April, 2023)

[17]   29 Car 11 c 3.

[18]   Cap. 100 Laws of Oyo State 1978; Cap. 100 Laws of Osun State 1978; Cap. 99 Laws of Ondo State 1978; Cap. 129 Laws of Bendel State 1976 (now Edo and Delta States). 

[19]   Cap. 133, Laws of Western Nigeria (1959)

[20]   The Statute of Fraud 1677 and the Wills Act 1837 are statutes of general application, part of the Received English Law, which framed the Nigerian legal system.

[21]   Snell, p. 106-111; Hansbury, pp. 205-216; Pettit, pp. 97-103; P. & M., pp. 30-39; Underhill, pp. 181-190.

[22]   Fabunmi Equity and Trusts in Nigeria (2nd ed.) p. 238

[23]   McCormick V. Grogan (1869) L.R. 4 H.L. 82, 88-89; Jones V. Badley (1868) 3 Ch.App. 362, 364

[24]   Ibid.

[25]   Wallsgrave V. Tebbs (1885) 2 K & J 313.

[26]   Att.-Gen. v. Chamberlain (1904) 90 L.T. 581;  Re Snowden [1979] 2 All E.R. 172.

[27]   [1937] 1 Ch 236

[28]   [1929] AC 318

[29]   Lawprof.co Blackwell v Blackwell [1929] AC 318: available at https://lawprof.co/trust/formality-cases/blackwell-v-blackwell-1929-ac-318/ (accessed on 27th April 2023)

[30]   [1927] 2 All E.R. 172 at page 177.

[31]   1977 WJSC-HC 406

[32]   [1951] 1 Ch 344

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