In general, the deceased would usually name the beneficiaries in the will to express their wishes to leave their estate behind for their benefits. And in most situation, each beneficiary named in the Will is intended to be the last and final recipient of the assets bequeathed by the deceased.
However, there are exceptional circumstances where the deceased intends for the beneficiary to act as a trustee to hold on the assets on trust for another person who cannot be named in the will to receive the gift. These people are usually mistress, illegitimate child and chauffeurs. This is when a “secret trust” will come into effect.
The formation of a valid secret trust requires intention, communication and acceptance of the obligation by the trustee.
The Federal Court decided in Chin Jhin Thien & Anor v Chin Huat Yean @ Chin Chun Yean & Anor  1 LNS 662 that the doctrine of secret trust was expressly recognized in Malaysia.
The Plaintiffs are the lawful children of the Deceased from the first marriage.
The Defendants are the Deceased’s elder brother and nephew.
The Deceased had three wives.
On 14.07.1976 the Deceased married his first wife. They had two children (the 2 Plaintiffs in this case).
The Deceased had 4 children with his second wife.
The Deceased and the third wife had no children.
The second wife is the first wife’s elder sister.
On 8.08.1991, a decree nisi was granted between the first wife and the Deceased but the decree was never made absolute.
In 2013 the Deceased was diagnosed with renal cancer.
On 18.12.2013 the Deceased made a Will.
On 24.12.2013 the Deceased died, which also falls on this date of birth.
On 12.02.2014 the Defendants obtain a Grant of Probate in the High Court of Kuala Lumpur.
The Plaintiffs filed a civil suit in the High Court of Kuala Lumpur seeking:-
- An order declaring the Grant of Probate null and void.
- A declaration that the Will dated 18.12.2013 is null and void.
The Defendants argued that:-
- The Deceased was mentally alert, lucid and capable of making the Will;
- The Will was a secret trust and Defendants were only the trustee, not the true beneficiaries, for the second wife and her children.
Matter proceeded in the High Court whereby the High Court allowed the Plaintiff’s claim and further concluded that:-
- The Deceased did not have the testamentary capacity to make the Will; and
- There were suspicious circumstances surrounding the making of the Will.
The Defendants then appealed to the Court of Appeal. The Court of Appeal set aside the decision in the High Court on the following grounds:-
A testator could gift his estate to any person. The only instance whereby probate could be set aside is if the testator did not have the testamentary capacity to execute a valid Will (which is not in this case). Testamentary capacity was related to medical evidence or related to credible evidence.
The Plaintiff’s begin dissatisfied with the decision in the Court of Appeal, appealed to the Federal Court.
There is no reason to hold that the secret trust did not exist. The circumstances in which a testator creates a “secret trust” to facilitate the intention to provide for certain parties. In this case, the evidence revealed that the “secret trust” was created to provide for the second wife’s children, and the Defendants were to manage the Deceased’s estate wisely. It is also in the interest of justice that the secret trust is upheld so that the Deceased’s estate is not given to the Defendants, but uphold the wishes of the Deceased (as per the “secret trust”).
The Federal Court then dismissed the appeal and held that secret trust as a creature of common law, operates outside the formalities of the Wills Act 1959. This subsequently confirmed the validity of secret trusts in Malaysia. Further, the Federal Court affirmed that in the event the secret trust fails, the trustee will be entitled to accept the assets held on trust absolutely with no obligation to the intended beneficiary.
Finally, it was concluded that the creation of secret trusts was enforced to protect the testamentary freedom of testators. The Court also took into consideration that the interest of society requires that a testator should make adequate provision for his surviving family. Hence, the Court decided that it was in the interest of justice that the secret trust was upheld to respect the deceased’s wishes.