For a trust to be valid, it requires the coincidence of three conditions which are known as "the three certainties". If any of these conditions are absent then the trust will be void ab initio, form the very start. The proposition of the three certainties is taken from the dictum of Lord Langdale in the leading case Knight v Knight 1 :
"As a general rule, it has been laid down, that when property is given absolutely to any person, and the same person is, by the giver who has power to command, recommend, or entreated or wished, to dispose of that property in favour of another, the recommendation, entreaty or wish shall be held to create a trust. First if the words were so used, that upon the whole, they ought to be construed as an imperative; secondly, if the subject of the recommendation or wish is certain; and thirdly, if the objects or persons intended to have benefit of the recommendation or wish also be certain."
With due respect, to paraphrase Lord Langdale, for a trust to be valid there must be: a certainty of words; a certainty of subject-matter; and a certainty of objects.
1. Certainty Of Words Or Intention
The Settlor must have shown to have intended to create a trust before the court will hold that one has been created. No particular form of words is needed and it is not even necessary to use the word "trust". Similarly, there is no actual requirement for the trust to be in writing, but it would be a brave trustee not to have at least some evidence of his appointment.
The words used must show that the obligation on the alleged trustees is sufficiently imperative as to amount to a trust. In the 18 th and 19 th centuries, the English Court of Chancery (now replaced by a division of the High Court) was prepared to accept precatory words. Words in the will or deed expressing the donor’s wish, hope, desire or confidence that the donee should deal with the property in a particular way.
The attitude of the Court changed in 1871 in the Court of Appeal decision in Lambe v Eames 2 . The Testator had left his estate 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 held that the gift was an absolute gift to the widow and not a trust.
The Leading case supporting this position and establishing the accepted position in relation to the use of words was Re Adams and The Kensington Vestry.3 In this case the testator left his estate "unto and to the absolute use of my wife…… in full confidence that she will do what is right as to the disposal thereof between my children, either in her lifetime or by will after her decease". The Court of Appeal held the gift to be absolute, Cotton LJ added:
"I have no hesitation in saying myself, that I think some of the older authorities went a great deal too far in holding some words appearing in a will were sufficient to create a trust…."
Following this decision, the words used to create a trust must make it plain that the intention was to create a trust. In most instances today, trust documents are drafted by lawyers or trust professionals and one would hope that these should not present any difficulty. Where problems commonly arise are where trusts are created under wills and the draftsman has not taken all necessary care in setting out clearly the intentions of the testator or testatrix.
Importantly, the courts will consider the whole context of the case to determine whether a trust has been created. This is to avoid as far as possible the frustration of the testator(ix) or settlor’s wishes. If there is insufficient certainty of intention then the gift takes effect as an absolute gift and no trust will be held to exist.
2. Certainty Of Subject-Matter
There are two aspects to this requirement:
1. There must be certainty as to what property is to be held upon trust; and
2. there must be certainty as to the extent of the beneficial interest of each beneficiary.
The first is essential as a trustee must know exactly what is and what is not included within the trust. A failure to deal with the property that belongs to the trust appropriately may result in a breach of trust.
For example, if the trust is declared of "Blackacre" being a property owned by the settlor or "£100,000" then the requirement is satisfied as these are readily identifiable. However, see Palmer v Simmonds 4 where the Settlor declared that the assets were to be "the bulk of his estate". The trust failed for uncertainty.
The beneficial interest of each beneficiary must be certain so that the trustees know exactly what or how much each beneficiary will be entitled to on distribution of the trust and prior to that, what income should be accumulated for or paid to the beneficiary.
In Boyce v Boyce 5 a trust failed for uncertainty as to beneficial interest where a testator left several houses on trust for his wife for life and on her death to convey any one house to his daughter A, as she might choose and the remaining houses to his daughter B. A died before she could make a choice; this left uncertainty as to what particular house B should receive, so the trust for B was void.
Note however, where the Court can make an interpretation as to the testators or settlor’s intentions they will seek to do so, as in Re Golay 6 where a trust was created providing " a reasonable income" from certain properties, the Court was able to determine what a reasonable income was.
Note there will be no uncertainty in the following cases:
1. Where the trustees have a discretion as to what each beneficiary should receive in the case of a discretionary trust.
2. Where the trust does not refer to the beneficial interest of the beneficiaries and where it is possible to apply the maxim "equity is equality" and divide the trust equally between the beneficiaries.
3. Where the Settlor declares a trust in respect of an identified bank account, which unknown to the Settlor is subsequently changed in form, i.e. from a cheque account to a deposit account.
4. Where the Settlor declares, say for example, 5% of the shares in a company, X when for example he holds 950 out of the 1,000 issued shares, the Court will seek to identify the 50 shares to be held on trust.
Again, if uncertainty persists, the gift will be absolute.
3. Certainty of Objects
It is essential that the beneficiaries under a trust should be clearly defined or that a formula exists which enables the trustees to ascertain them. If a trustee makes a distribution to non-objects, then they may be held personally liable to replace the assets.
There are different tests for certainty of objects in fixed and discretionary trusts.
A fixed trust is one under which the Settlor has defined the beneficial interests which the beneficiaries are to receive and the trustees have no authority to alter them, for example, "£10,000 to my children in equal shares" or "£10,000 to A for life, remainder as to two-thirds to B and one-third to C"
The test in fixed interest trusts is that it must be possible to draw up a complete list of all the beneficiaries and if not the trust is void. This is known as the "Class Ascertainability Rule"
The trustees have the discretion as to who shall receive income and/or capital from the trust, and in some cases, what amounts they will receive, if any. It is essential therefore, as the trustees can choose amongst a class of beneficiaries who can benefit that the class is determined.
Note, except in rare cases where the trust instrument includes a discretion to distribute only, the trustees merely have to consider whether it is appropriate to exercise their discretion from time to time.
There appear to be two types of discretionary trusts when applying a test for certainty of objects:
Burrough v Philcox trusts
A power in the nature of a trust arises where an instrument is drafted to give a person a power of selection among a class, but if the power is not exercised or fails to deal with all the property, there must be an equal division amongst the class.
McPhail v Doulton trusts
In these trusts, the equal distribution of the assets is not the intention of the Settlor, but merely the provision of benefits in a most tax efficient manner, or to those who meet specific criteria, for example, in a company benefits scheme, they are current or past employees of a company.
The test historically was the "Class Ascertainability Rule" but this has now been overruled in so far as it applies to discretionary trusts. The test is now based upon the judgement in the leading case McPhail v Doulton  AC 424 7 and the obiter dictum (comments outside of the judgement) of Lord Wilberforce:
"As a matter of reason, to hold that a principle of equal division applies to trusts such as the present is certainly paradoxical. Equal division is surely the last thing the settlor ever intended: equal division among all may, probably would, produce a result beneficial to none. Why suppose that the court would lend itself to whimsical execution? And as regards authority I do not find that the nature of the trust, and the court’s powers over trusts calls for any such rigid rules. Equal division may be sensible and has been decreed in family trusts, for limited class; hence there is life in the maxim "equality is equity", but the cases provide numerous examples where this has not been so, and a different kind of execution has been ordered, appropriate to the circumstances…"
The test is now, "whether it can be said with certainty that any given individual is or is not a member of the class"
Thus it must be possible for the trustee when contemplating exercising their discretion to determine that the individual or individuals intended to receive the benefit are either a member of the beneficial class or not. If they are not, then the trustee cannot make the distribution. Failure to be able to identify the objects with certainty will result in the failure of the trust for uncertainty.
As explained, the "three certainties" have to coincide, or in other words, they all have to be present for a trust to be valid. If one of the certainties is missing the trust will be void ab initio and the person intended to act as trustee may be given the assets personally. This means, that rather than the individual or individuals, intended to benefit from the gift, receiving their entitlement, the person intended to act as trustee receives the assets for his own use!
Note, there is one exception to the three certainties requirement and that is "purpose trusts" or charitable trusts and these will be considered separately and are the subject of the next article in this series.
"If a man will begin with certainties, he shall end in doubts; but if he will be content to begin with doubts, he shall end in certainties"
Francis Bacon 1561-1626
The Advancement of Learning (1605) bk.1 ch.5, sect 8
1 (1840) 3 Beav 148
2 (1871) 6 CH App 597
3 (1884) 27 Ch D 394
4 (1854) 2 Drew 221
5 (1849) 16 Sim 476
6  1 WLR 1969
7  AC 424
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.