The three certainties

The requirement that a valid express trust must satisfy the three certainties is fundamental to English equity. As stated by Lord Langdale MR in Knight v Knight (1840) 3 Beav 148, a settlor must demonstrate: (1) certainty of intention to create a trust; (2) certainty of subject matter; and (3) certainty of objects (beneficiaries). Each certainty is analytically distinct and serves a discrete function. Without all three, no trust arises, though other equitable or legal relations may be created.

The three certainties doctrine reflects equity's insistence on conceptual precision and enforceability. Courts must be able to identify what property is held on trust, for whom, and whether the arrangement was genuinely intended to create the distinctive obligations of trusteeship. These requirements protect both trustees – who must know the scope of their duties – and beneficiaries, whose proprietary rights depend on clear definition.

The modern law has developed nuanced tests for each certainty, particularly in response to commercial practice. Certainty of intention has become more flexible, accommodating informal language where trust creation is manifest. Certainty of subject matter has proved more rigid, especially following Re Goldcorp Exchange Ltd [1995] 1 AC 74, though recent decisions suggest some softening in specific commercial contexts. Certainty of objects has bifurcated: the 'complete list' test applies to fixed trusts, while discretionary trusts need satisfy only the more permissive 'given postulant' test established in McPhail v Doulton [1971] AC 424.

This week's materials build on Week 1's examination of the trust's essential characteristics. The three certainties give operational content to the trust concept, translating abstract principles into requirements that structure day-to-day practice in both family settlements and commercial transactions. Mastery of this doctrine requires not only knowledge of leading authorities but also appreciation of the policy concerns – particularly certainty, autonomy, and administrative workability – that animate judicial reasoning.

The three certainties doctrine emerged from the Court of Chancery's long experience with uses and trusts. While Lord Langdale MR's formulation in Knight v Knight is conventionally treated as the locus classicus, earlier decisions reveal the underlying concerns. Medieval uses were often vague as to beneficiaries and sometimes as to property, creating enforcement difficulties. The Statute of Uses 1535 attempted to eliminate uses altogether, but its failure to cover all cases meant equity continued to police trust creation.

By the eighteenth century, courts insisted that trusts be sufficiently certain to be enforceable. In Morice v Bishop of Durham (1804) 9 Ves Jun 399, Sir William Grant MR emphasised that 'there must be somebody, in whose favour the court can decree performance'. This requirement of enforceability underpinned the development of certainty of objects. Similarly, cases involving incomplete gift transactions (such as Milroy v Lord (1862) 4 De GF & J 264) illustrated the need to distinguish genuine trust creation from mere expressions of hope or intention to make future provision.

Knight v Knight itself concerned a bequest of property to a brother with a direction to leave the estate 'in the same plight' to certain relatives. Lord Langdale held that a trust had been created, but in doing so articulated the tripartite test that became canonical. The mid-Victorian period saw increasing doctrinal refinement, particularly as family settlements grew more complex and commercial uses of the trust began to emerge.

The twentieth century brought significant evolution. The decision in McPhail v Doulton reflected a modern willingness to uphold discretionary trusts that would have failed the older 'complete list' test, marking a shift towards facilitation of settlor intent where administrative workability was preserved. The late twentieth century's growth in collective investment schemes and pension trusts placed new pressure on traditional certainty rules, particularly certainty of subject matter, as courts grappled with claims involving pools of fungible assets.

Historical development reveals an underlying tension. On one hand, equity seeks to give effect to settlor intention and adapt to evolving commercial needs. On the other, the trust's proprietary character and the trustee's onerous obligations demand rigorous standards of certainty. This tension continues to animate contemporary debates, particularly where informal or commercial contexts are concerned.

Certainty of Intention

Certainty of intention (sometimes called certainty of words) requires that the settlor intended to create a trust rather than some other legal relationship. The test is objective: what matters is not the settlor's subjective state of mind but whether, on a proper construction of the words and conduct, an intention to impose binding trust obligations can be discerned. As Megarry VC observed in Re Kayford Ltd [1975] 1 WLR 279, the word 'trust' need not be used; the question is whether 'in substance a sufficient intention to create a trust has been manifested'.

Precatory words – expressions of hope, wish, or moral obligation – do not normally suffice. In Lambe v Eames (1871) LR 6 Ch App 597, a testator gave property to his widow 'to be at her disposal in any way she may think best, for the benefit of herself and her family'. The Court of Appeal held this created an absolute gift, not a trust. The nineteenth-century presumption that precatory words created trusts (the 'precatory trust' doctrine) has been firmly rejected. Modern courts treat expressions such as 'in full confidence that', 'hoping that', or 'it is my wish' as merely indicating motive for an outright gift unless the context demonstrates otherwise: Re Adams and the Kensington Vestry (1884) 27 Ch D 394.

However, context remains crucial. In commercial settings, courts have shown willingness to find trust intention from arrangements designed to protect creditors or customers. Re Kayford Ltd upheld a trust where a mail-order company, in financial difficulty, opened a separate bank account designated for customers' advance payments. No trust deed existed, but the commercial purpose and segregation of funds demonstrated sufficient intention. Similarly, Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 recognised that loans advanced for specific purposes could give rise to trusts, even absent express trust language.

The test is essentially one of construction. Courts examine the whole context, including the relationship between parties, the nature of the transaction, and surrounding circumstances. Informal or domestic contexts receive the same scrutiny as formal instruments: Paul v Constance [1977] 1 WLR 527 held that repeated oral statements to a partner that money in a bank account 'is as much yours as mine' sufficed to create a trust, given the entire course of dealing.

Certainty of Subject Matter

Certainty of subject matter has two limbs: certainty as to which property is held on trust, and certainty as to the beneficiaries' interests in that property. Both must be satisfied.

Foundation Questions

1. 'I leave my estate to my wife, in the hope that she will provide for our children as she thinks fit.' Advise whether a trust has been created.

2. Alan owns 1,000 shares in XYZ Ltd. He declares orally: 'I hold 100 of these shares on trust for my daughter.' Two weeks later, Alan sells 900 shares. Advise Alan's daughter.

Standard Questions

3. Beatrice's will provides: 'I give my residuary estate to my trustees to be distributed among such of my relatives and dependants as they see fit.' Advise the trustees whether this trust is valid, and how they should identify potential beneficiaries.

4. Charlie loans £500,000 to Delta Ltd 'for the purpose of purchasing new machinery'. The money is paid into Delta's general account and used for working capital. Delta becomes insolvent. Advise Charlie.

Challenge Question

5. 'The distinction drawn in Hunter v Moss between tangible and intangible property lacks theoretical justification and creates unacceptable uncertainty in trust law. The decision should be overruled at the first opportunity.' Critically evaluate this statement with reference to academic commentary and subsequent case law.

Essential Reading

Hayton, D., 'Uncertainty of Subject-Matter of Trusts' (1994) 110 LQR 335. A trenchant critique of Hunter v Moss, arguing that the decision is conceptually incoherent and inconsistent with fundamental property principles.

Emery, C., 'The Most Hallowed Principle: Certainty of Beneficiaries of Trusts and Powers of Appointment' (1982) 98 LQR 551. Detailed analysis of McPhail v Doulton and Re Baden (No 2), examining the conceptual/evidential uncertainty distinction and its practical application.

Martin, J., 'Certainty of Subject Matter: A Defence of Hunter v Moss' [1996] Conv 223. A rare defence of the Court of Appeal's decision, emphasizing commercial practicality and the distinctive nature of intangible property.

Academic Monographs

Penner, J. E., The Law of Trusts (12th edn, OUP 2022), ch 4. Accessible and rigorous treatment of the three certainties, with thoughtful discussion of Hunter v Moss and subsequent developments.

Thomas, G. & Hudson, A., The Law of Trusts (3rd edn, OUP 2021), ch 4. Comprehensive doctrinal analysis with extensive citation of authority; particularly strong on certainty of objects.

Chambers, R., Resulting Trusts (OUP 1997), ch 3. Essential reading on Quistclose trusts, offering the resulting trust analysis that challenges Lord Wilberforce's two-trust model.

Advanced and Comparative

McFarlane, B. & Stevens, R., 'The Nature of Equitable Property' (2010) 4 J Eq 1. Sophisticated theoretical analysis of equitable proprietary rights, relevant to understanding certainty of subject matter debates.

Gretton, G. L., 'Trusts Without Equity' (2000) 49 ICLQ 599. Comparative perspective on Scottish trust law, illuminating how certainty requirements differ in the absence of a separate equity jurisdiction.

Matthews, P., 'The New Trust: Obligations Without Rights?' in A. J. Oakley (ed), Trends in Contemporary Trust Law (OUP 1996). Critical examination of modern trust law development, including analysis of certainty of objects and the trust/power distinction.

Swadling, W., 'The Quistclose Trust: A Reply to Chambers' in P. Birks & F. Rose (eds), Restitution and Banking Law (Mansfield Press 1998). Alternative theoretical account of Quistclose trusts, arguing for a retention-of-title analysis rather than resulting or express trust.