Equity and Trusts

The Three Certainties in Trusts: A Revision Guide

Master certainty of intention, subject matter, and objects with the cases and tests your examiner actually wants to see.

If a trust fails the three certainties, it fails completely. No certainty of intention means no trust at all. No certainty of subject matter, same result. No certainty of objects and the trustees have nobody to benefit. Get these straight and you have a framework that handles roughly a third of a standard equity and trusts paper.

Why the Three Certainties Exist

Trusts impose obligations. A trustee who holds property on trust can be compelled by a court to perform. That compulsion only works if the court knows what was intended, what property is involved, and who benefits. The three certainties are, at root, the minimum information a court needs to supervise a trust. Lord Langdale MR articulated this neatly in Knight v Knight (1840), and the structure has been used ever since.

Examiners love this topic for problem questions because each certainty can be made to fail in a different way, and a clever setter will make two of them look fine while hiding the defect in the third.

Certainty of Intention

The Basic Test

The settlor must intend to create a trust, not merely express a moral wish or impose a personal obligation. The court looks at the substance of the words used, not the label. Calling something a "trust" does not guarantee one exists. Saying "I give" without any trust language does not rule one out.

The leading modern authority is Paul v Constance [1977] 1 WLR 527. Mr Constance and Mrs Paul were an unmarried couple. He repeatedly told her that the money in his bank account was "as much yours as mine". The Court of Appeal held those informal words were sufficient to create a trust. He had no legal training. He never said the word "trust". It did not matter. The court asked whether, objectively assessed, his words and conduct showed an intention to hold the money for her benefit as well as his own.

That objective approach is the key move. You are not looking for subjective certainty in the settlor's mind; you are asking what a reasonable person would take the words to mean in context.

Precatory Words

The danger zone is precatory language: words of hope, wish, or request. "I hope that my wife will use this property for the benefit of our children" does not create a trust. It expresses a desire. Victorian courts occasionally found trusts in such language, but Re Adams and the Kensington Vestry (1884) 27 ChD 394 firmly corrected that. The testator left property to his wife "in full confidence" she would act for their children. The Court of Appeal held no trust arose. Precatory words create moral pressure, not legal obligation.

For your problem question, underline words like "wish", "hope", "desire", "request", and "confident". They are red flags. Contrast them with words like "on trust", "to hold for", or conduct (as in Paul v Constance) that shows an intended legal relationship.

Sham Trusts and the Quistclose Point

A brief note worth knowing for strong answers: a trust can be found even in a commercial loan arrangement. Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 established that money lent for a specific purpose can be held on trust for the lender if that purpose fails. The intention to create a trust is inferred from the restriction on use. You will not always need this, but it shows that intention is found in substance, not form.

Certainty of Subject Matter

The Property Must Be Identifiable

A trust needs property. If you cannot identify what is held on trust, the trustee cannot manage it and the court cannot enforce it. There are two distinct problems here: uncertainty about the property itself, and uncertainty about the beneficial shares.

On the property: Re London Wine Co (Shippers) Ltd [1986] PCC 121 is the classic case. Wine merchants held large quantities of wine in warehouses, some of which had been sold to customers. The company went insolvent. Customers argued they held beneficial interests in specific bottles. The court rejected this. The wine had not been separated or appropriated to any specific purchaser. You cannot have a trust over an unidentified part of a bulk.

Contrast Hunter v Moss [1994] 1 WLR 452, which is controversial but heavily examined. The defendant told the claimant he held 50 out of his 950 shares in a company on trust for him. No specific 50 shares were identified. The Court of Appeal held the trust was valid. Because all the shares were identical (shares in the same company, same class), there was no need to segregate. Any 50 would do.

The tension between Re London Wine and Hunter v Moss is a gift to examiners. The distinction drawn is between tangible chattels (where segregation matters because the individual items differ) and intangible assets like shares of the same class (where they do not). Academics have criticised this distinction. Your answer should acknowledge the controversy.

Uncertainty of Beneficial Shares

Even if you know what the property is, the trust fails if the beneficial entitlements are uncertain. "Some of my residuary estate" is void because "some" is meaningless as a quantification. Sprange v Barnard (1789) 2 Bro CC 585 is the old authority: a testatrix left property to her husband for his "sole use", with whatever he did not use to pass to others. The court held the gift over failed. The subject matter (the remainder) was too uncertain to enforce.

In a problem question, look for vague quantifiers: "a reasonable amount", "a portion", "the bulk of". All of these are likely to make the certainty of subject matter fail.

Certainty of Objects

This is the most technically complex of the three, and it is the one where the type of trust matters enormously.

Fixed Trusts

For a fixed trust (where the shares are specified in the trust instrument), the complete list test applies. The trustees must be able to draw up a complete list of every beneficiary. If they cannot, the trust fails. IRC v Broadway Cottages Trust [1955] Ch 20 established this. The rationale is that equal division among all beneficiaries requires knowing who all of them are.

Discretionary Trusts

For discretionary trusts (where the trustees choose who benefits and in what proportion), the test changed dramatically in McPhail v Doulton [1971] AC 424. The House of Lords abandoned the complete list test for discretionary trusts and replaced it with the is-or-is-not test: can it be said with certainty, of any given individual, whether they are or are not within the class?

Lord Wilberforce reasoned that trustees exercising a discretion do not need a complete list. They need to survey the range of objects, but they can still make valid appointments without knowing every possible beneficiary.

The McPhail test was then applied in Re Baden's Deed Trusts (No 2) [1973] Ch 9, and this is where it gets complicated. Three members of the Court of Appeal gave three different approaches to what the is-or-is-not test actually requires when some potential objects are conceptually uncertain:

• Sachs LJ: evidential uncertainty does not cause failure. If you cannot prove whether a person falls within the class, they are simply not within it. The trust survives.
• Megaw LJ: the trust is valid if a substantial number of objects can be identified with certainty, even if there are others on the borderline.
• Stamp LJ: the test must be satisfied for every conceivable person. If you cannot say with certainty of any given person whether they are in or out, the trust fails.

Stamp LJ's approach is the strictest. Sachs LJ's is the most trust-friendly. For exam purposes, you need to know all three and apply them to your facts. Examiners often set class descriptions where the three approaches produce different outcomes, which is precisely the point.

Conceptual vs Evidential Uncertainty

You need to distinguish these cleanly.

Conceptual uncertainty means the class description is too vague to have a defined meaning. "Old friends" or "persons who have rendered services to the settlor" are conceptually uncertain. Nobody can define the class boundary. This is fatal under any of the Re Baden No 2 approaches.

Evidential uncertainty means the class is conceptually clear but it may be hard to prove who falls within it. "Former employees of XYZ Ltd" is conceptually certain. Whether a particular person was employed there is a question of evidence. Under Sachs LJ's approach, this does not invalidate the trust.

Administrative Unworkability and Capriciousness

Even if you pass the is-or-is-not test, a discretionary trust can fail for administrative unworkability. In McPhail, Lord Wilberforce warned that a trust whose class of objects is so wide as to be "administratively unworkable" would fail. R v District Auditor, ex parte West Yorkshire Metropolitan County Council [1986] RVR 24 applied this. A trust for the benefit of the inhabitants of West Yorkshire (roughly 2.5 million people) was held void. The class was not conceptually uncertain; it was just unmanageable.

Distinct from that is capriciousness, where the trust makes no rational sense ("for the benefit of people with red hair who were born on a Tuesday"). Courts have suggested this could also invalidate a trust, though it rarely arises in practice.

Powers vs Trusts

Do not confuse a trust power with a mere power. A trustee under a trust must distribute. A donee of a mere power may distribute but need not. The certainty of objects test for mere powers is more relaxed: the is-or-is-not test applies but administrative unworkability is less likely to be fatal. Know this distinction, because setters sometimes blur the two to see if you notice.

Pulling It Together in a Problem Question

When you spot a three certainties question, run through a structured analysis:

1. Intention: What did the words actually say? Are they imperative or precatory? Look at the full context, not just one phrase.
2. Subject matter: Is the property identified? If it is tangible property in a bulk, has it been segregated? If intangible and fungible, apply Hunter v Moss. Are the beneficial shares clear?
3. Objects: What type of trust is this? Fixed or discretionary? Apply the right test. If discretionary, go through the three Re Baden No 2 approaches and note where they diverge on your facts.

If you find that one certainty fails but the others are met, ask whether the property falls back on resulting trust for the settlor (or their estate). That is often the correct outcome to state.

For broader reading on the cases mentioned here, the Equity & Trusts topic hub collects the key authorities in one place. And if you want to practise applying these rules under timed conditions, past papers with model answers are the most efficient way to find out whether your analysis actually holds up.

One last thing: the three certainties are examined both as a standalone problem and embedded in larger questions about constitution of trusts or secret trusts. If you see a question about whether a trust was properly constituted, check the certainties first before you reach for Milroy v Lord. An imperfectly constituted trust that also lacks certainty of subject matter needs both points addressed.