SQE1 Trusts Law Revision Guide 2026: Three Certainties, Trustees, Beneficiaries and Breach

Why Trusts Law Is High-Yield on FLK2

Trusts Law is one of the highest-volume subjects on the FLK2 paper of the SQE1, and one of the very few subjects that can be revised almost entirely from primary case law and a short list of statutory sections. Across a typical sitting you can expect somewhere in the region of fifteen to twenty single-best-answer (SBA) questions on Trusts, often clustered in the morning sessions of FLK2 and frequently overlapping with Land Law — particularly on the co-ownership and constructive trust doctrines that govern the family home.

The subject rewards candidates who treat it as a structured analytical exercise. Every Trusts question turns on the same handful of doctrines: were the three certainties present, were the formalities satisfied, was the trust constituted, and — at the back end — was there a breach by the trustee and what is the remedy? Candidates who try to memorise outcomes case by case end up confused. Candidates who learn the framework and slot the cases into it tend to score very well.

If you are revising the rest of FLK2, our SQE1 Land Law revision guide is the natural companion piece on the property side, and our SQE1 contract law revision guide overlaps on third-party-rights doctrines such as Quistclose trusts and dishonest assistance.

The SQE1 Trusts Syllabus

The SRA assessment specification sets the scope. Eleven core topic areas appear in our Trusts study notes and on the FLK2 paper:

Express Trusts: The Three Certainties

For a valid express trust the settlor must demonstrate the three certainties laid down in Knight v Knight (1840) 3 Beav 148: certainty of intention, certainty of subject matter, and certainty of objects.

Certainty of Intention

The settlor must intend to create a trust, not merely to make a gift, lend money, or impose a moral obligation. The use of the word "trust" is helpful but not decisive. Courts look at substance.

In Paul v Constance [1977] 1 WLR 527 a man's repeated statement to his partner that "the money is as much yours as mine" in respect of a joint bank account was held to evidence the intention to create a trust. In Re Kayford Ltd [1975] 1 WLR 279 a struggling mail-order company opened a separate account for customer prepayments — the segregation alone was held sufficient evidence of intention.

Precatory language ("in full confidence", "I hope", "I wish") generally negates intention since Lambe v Eames (1871) LR 6 Ch App 597.

Certainty of Subject Matter

The trust property must be identifiable, and the beneficial interests must be quantifiable. Palmer v Simmonds (1854) 2 Drew 221 — "the bulk of my estate" — failed for uncertainty. Sprange v Barnard (1789) 2 Bro CC 585 — "the remaining part of what is left" — failed for the same reason.

A different problem arises with bulk holdings of identical property. In Re London Wine Co (Shippers) Ltd [1986] PCC 121, Oliver J held that a declaration of trust over unascertained bottles in a bulk failed because the trust property was not segregated. But in Hunter v Moss [1994] 1 WLR 452 the Court of Appeal held that a declaration of trust over 50 of 950 identical company shares was valid, on the basis that all shares of the same class were interchangeable. The two cases sit uneasily together; the SQE1 expects you to know both and to apply Hunter v Moss to fungible intangibles such as shares.

Certainty of Objects

Different tests apply depending on the type of trust:

The post-McPhail tests have practical traps. A class can fail if it is conceptually uncertain ("my old friends") even though individual cases might be evidentially clear. It can also fail for administrative unworkability where the class is so wide the trustees cannot sensibly distribute (R v District Auditor, ex p West Yorkshire MCC (1986) — "the inhabitants of West Yorkshire").

Formalities and Constitution

Even where the certainties are satisfied, additional rules govern how a trust comes into existence.

Formalities

Two provisions of the Law of Property Act 1925 are central:

• s.53(1)(b) — a declaration of trust over land must be manifested and proved by writing signed by the person able to declare the trust. Note that this is an evidential requirement, not a constitutive one — an oral declaration of a land trust is unenforceable, but if reduced to writing later it becomes effective.
• s.53(1)(c) — a disposition of a subsisting equitable interest must be in writing signed by the disponer.

Section 53(1)(c) generated a long line of difficult cases. In Grey v IRC [1960] AC 1, oral instructions to trustees followed by written confirmation were held to be a "disposition" requiring writing. In Vandervell v IRC [1967] 2 AC 291, an instruction by an absolute owner to transfer both legal and equitable title fell outside s.53(1)(c) because the transfer of legal title automatically carried the equitable. In Vandervell (No 2) [1974] Ch 269, an automatic resulting trust ending was held not to require writing.

Constitution

A trust is constituted when the trust property is vested in trustees, or when the settlor declares themselves to be trustee. The classic statement is Milroy v Lord (1862) 4 De GF & J 264 — equity will not assist a volunteer, and an imperfect gift will not be saved by treating it as a declaration of self-trust.

Two common-law softenings have eaten into Milroy:

• Re Rose [1952] Ch 499 — where the settlor has done everything in their power to transfer the property, equity treats the transfer as complete from the moment they put the matter beyond their control. Applied to share transfers in Mascall v Mascall (1985) 50 P & CR 119.
• Pennington v Waine [2002] EWCA Civ 227 — equity will perfect an imperfect transfer where it would be unconscionable for the transferor to resile, even if they have not done everything in their power. The case has been controversial but remains the leading authority on unconscionability-based perfection.

The Beneficiary Principle and Purpose Trusts

A trust must generally have human beneficiaries who can enforce it. The Morice v Bishop of Durham (1804) 9 Ves 399 principle states that "there must be somebody in whose favour the court can decree performance".

Three categories of exception are examined:

1. Charitable purpose trusts — governed by the Charities Act 2011. To be charitable, a purpose must fall within one of the 13 statutory heads (s.3) and satisfy the public benefit test (s.4).
2. Anomalous non-charitable purpose trusts (Re Endacott [1960] Ch 232) — narrowly tolerated where the purpose is for the maintenance of tombs, animals, or specific monuments; not extended.
3. Re Denley trusts (Re Denley's Trust Deed [1969] 1 Ch 373) — purpose trusts with ascertainable persons benefiting are valid because those persons can enforce. Often used for unincorporated associations alongside the Neville Estates v Madden [1962] Ch 832 contract-holding analysis.

Resulting Trusts

A resulting trust returns beneficial interest to the settlor where equity presumes that was their intention. There are two species.

Presumed Resulting Trusts

Arise on a voluntary transfer or a contribution to purchase price. The classic statement is Dyer v Dyer (1788) 2 Cox Eq 92 — where A pays the purchase price for property conveyed to B, B holds on resulting trust for A in proportion to the contribution.

Section 60(3) LPA 1925 provides that on a voluntary transfer of land, no resulting trust is presumed merely because the transfer was not expressed to be for the use or benefit of the transferee. The position for personalty is unchanged from common law.

The presumption of advancement rebuts the resulting trust where the transferor stood in a relationship of obligation to provide for the transferee — historically father to child, husband to wife. The presumption was statutorily abolished prospectively by s.199 Equality Act 2010, though the section has not been brought into force, so the common-law presumption remains relevant.

Automatic Resulting Trusts

Arise where an express trust fails or where there is a surplus after exhaustion of purpose. Re Vandervell's Trusts (No 2) and Air Jamaica v Charlton [1999] 1 WLR 1399 — surplus pension scheme funds returned to contributors.

The Quistclose trust (Barclays Bank v Quistclose Investments [1970] AC 567; analysed by Lord Millett in Twinsectra v Yardley [2002] UKHL 12) treats a loan made for a specific purpose as creating a resulting trust if the purpose fails. Useful for bridging finance and earmarked client funds.

Constructive Trusts

English law recognises institutional but not remedial constructive trusts (FHR European Ventures v Cedar Capital Partners [2014] UKSC 45). The constructive trust arises by operation of law in defined circumstances, not by judicial discretion.

The Family Home

The leading authorities are Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53. Where the legal title is in joint names and there is no express declaration of beneficial shares, the starting presumption is that beneficial ownership follows legal ownership equally. The presumption can be displaced where the parties' common intention, judged from the whole course of dealing, indicates a different proportion.

Where the legal title is in one party's sole name, Lloyds Bank v Rosset [1991] 1 AC 107 originally required either an express agreement supported by detrimental reliance, or direct contributions to the purchase price. Stack and Jones loosened this for joint-name cases but not, strictly, for sole-name cases — the courts have nevertheless drifted towards a more flexible "whole course of dealing" approach.

Pallant v Morgan Equity

Pallant v Morgan [1953] Ch 43 — where two parties agree that one will acquire property at auction on terms beneficial to both, and the other refrains from bidding in reliance, equity imposes a constructive trust to give effect to the agreement. Modernised in Banner Homes v Luff Developments [2000] Ch 372.

Fiduciary Breach and Bribes

FHR European Ventures v Cedar Capital Partners [2014] UKSC 45 settled that bribes and secret commissions received by a fiduciary in breach of duty are held on constructive trust for the principal — overruling the inconsistent line in Sinclair v Versailles. The point matters enormously on insolvency: a proprietary remedy beats unsecured creditors of the fiduciary.

Trustees: Appointment, Powers and Duties

Most of the working law lives in the Trustee Act 1925 (TA 1925) and the Trustee Act 2000 (TA 2000).

Appointment, Retirement, Removal

Trustees can be appointed under the trust instrument, by surviving trustees under TA 1925 s.36, or by the court under TA 1925 s.41. Retirement is governed by TA 1925 s.39 (with consent of co-trustees, leaving at least two trustees or a trust corporation). Removal is by court order or under TA 1925 s.36(1) where a trustee is unfit, incapable, or remains out of the UK for more than 12 months.

Statutory Duty of Care

TA 2000 s.1 imposes a duty to "exercise such care and skill as is reasonable in the circumstances", with a higher standard for professionals. The duty applies to investment, delegation, insurance, and the exercise of associated powers (Schedule 1).

Investment

TA 2000 ss.3–8 grant a general power of investment as if the trust property were the trustee's own (s.3). Section 4 requires regard to the standard investment criteria (suitability, diversification). Section 5 requires the trustee to obtain proper advice unless reasonably concluded unnecessary. Section 8 gives a power to acquire freehold or leasehold land.

Delegation

TA 2000 ss.11–23 govern delegation of administrative functions to agents. Trustees cannot delegate purely fiduciary or distributive decisions (s.11(2)). A written policy statement is required when delegating asset management (s.15).

Advancement and Maintenance

• TA 1925 s.32 (advancement) — power to advance capital to a beneficiary. The Inheritance and Trustees' Powers Act 2014 modernised the section: trustees may now advance the whole of a beneficiary's presumptive share, no longer capped at one-half.
• TA 1925 s.31 (maintenance) — power to apply income for the maintenance, education, or benefit of an infant beneficiary. The 2014 Act removed the prior "all the income or such part as may, in all the circumstances, be reasonable" limitation.

Fiduciary Duties

The "no profit, no conflict" rules are strict and unforgiving:

• No profit — Keech v Sandford (1726) 25 ER 223; Boardman v Phipps [1967] 2 AC 46. A fiduciary cannot retain unauthorised profit even where the principal could not have obtained it.
• No conflict — Bray v Ford [1896] AC 44. The trustee must not place themselves in a position where personal interest conflicts with duty.

Beneficiaries' Rights

Beneficiaries who are adult, sui juris, and absolutely entitled between them can collapse the trust under the rule in Saunders v Vautier (1841) Cr & Ph 240. The rule operates regardless of the settlor's wishes — it is a property-based rule, not a discretionary one.

Beneficiaries also have a right to information about the trust, governed not by a strict proprietary right but by the court's inherent supervisory jurisdiction (Schmidt v Rosewood Trust Ltd [2003] UKPC 26). The trustee cannot withhold information arbitrarily but is not obliged to disclose memoranda of confidential reasons.

Breach of Trust and Remedies

When a trustee breaches duty, the beneficiary has a menu of personal and proprietary remedies.

Personal Liability — Equitable Compensation

The modern law is Target Holdings v Redferns [1996] AC 421 as refined by AIB Group v Mark Redler & Co [2014] UKSC 58. The trustee is liable to put the trust fund in the position it would have been in had the breach not occurred. Causation must be proved on a "but for" basis — Lord Toulson in AIB rejected the more generous "stop-the-clock" approach that some had read into Target.

Proprietary Remedies — Tracing

Tracing identifies the value of misapplied trust property in the hands of the trustee or third parties. Foskett v McKeown [2001] 1 AC 102 is the landmark — Lord Millett held that tracing is not itself a remedy but the process of identification preceding a remedy.

Defences

• Section 61 Trustee Act 1925 — court may relieve a trustee from personal liability where they acted "honestly and reasonably" and ought fairly to be excused.
• Limitation Act 1980 s.21(3) — six-year limitation for breach of trust, except where (s.21(1)(a)) the breach was fraudulent or (s.21(1)(b)) the action seeks to recover trust property from the trustee — in which case there is no limitation.
• Consent and acquiescence — fully informed beneficiary consent or subsequent acquiescence bars the claim.

Third-Party Liability

Strangers to a trust can be personally liable for involvement in a breach. Two routes:

Knowing Receipt

Established in BCCI (Overseas) v Akindele [2001] Ch 437 — the recipient of trust property must have a state of knowledge that makes it unconscionable to retain the benefit. The Akindele test replaced the older five-grade Baden scale of knowledge.

Dishonest Assistance

Royal Brunei Airlines v Tan [1995] 2 AC 378 — the test is objective dishonesty. The accessory must have acted dishonestly by the standards of ordinary honest people, judged with knowledge of what they actually knew. Twinsectra v Yardley [2002] UKHL 12 briefly introduced a subjective second limb, but Barlow Clowes International v Eurotrust [2005] UKPC 37 and Group Seven Ltd v Notable Services LLP [2019] EWCA Civ 614 confirmed that the test is fully objective. Ivey v Genting Casinos [2017] UKSC 67 — the dishonesty test in Ivey mirrors the Tan approach and now applies across civil and criminal law alike.

Equitable Remedies

Equitable remedies are discretionary. The two-stage analysis: first ask whether the substantive right has been infringed; second ask whether the discretionary bars (delay, hardship, clean hands, adequacy of damages) prevent the remedy.

10 SQE1 Trusts Exam Techniques

1. Identify the Trust Type First

Before doing anything else, ask whether the question concerns an express, resulting, or constructive trust. Many wrong answers come from applying express-trust requirements (the three certainties, formalities) to a constructive trust, where they do not apply.

2. Run the Three Certainties as a Checklist

For every express trust question, mentally walk through intention, subject matter, and objects in turn. The wrong answer is usually generated by skipping one.

3. Match the Test to the Trust

For certainty of objects, distinguish carefully between fixed trusts (complete list), discretionary trusts ("is or is not"), and gifts subject to condition precedent (one-person). Getting these confused is the single most common Trusts mistake.

4. Check the Formalities Statute

Section 53(1)(b) (declarations of trust over land) and s.53(1)(c) (dispositions of equitable interests) catch many candidates out. If land is involved, ask: is there writing? If a transfer of an existing equitable interest is involved, ask: is there a signed writing?

5. Apply the Stack/Jones Framework

For family-home questions, start with legal title. Joint names → presumption of equal beneficial ownership; sole name → claimant must establish a common intention constructive trust. Do not jump to Stack without checking the title position first.

6. Distinguish Knowing Receipt from Dishonest Assistance

Knowing receipt requires the third party to have received trust property and to have a state of knowledge making retention unconscionable. Dishonest assistance does not require receipt — only objective dishonesty in helping the breach. A scenario can engage one, both, or neither.

7. Tracing Rules in Order

When property has been mixed, run through the rules in sequence: lowest intermediate balance, then choose between cherry-picking (against wrongdoer), pari passu, or Clayton's Case (current accounts only) for innocent mixings.

8. Watch for Saunders v Vautier Triggers

If all beneficiaries are adult, sui juris, and absolutely entitled between them, they can terminate the trust — even against a trustee's wishes. This often appears in distractor options.

9. Apply Section 61 Carefully

A trustee asking for relief under TA 1925 s.61 must show they acted honestly and reasonably. Not just honestly. The reasonableness limb is where most trustees lose.

10. Read Statutory Sections Precisely

The SQE1 frequently tests whether candidates know the precise section number — TA 2000 s.1 (duty of care), s.3 (general power of investment), s.4 (standard investment criteria), s.5 (advice). Drill these with our trusts flashcards until they are reflex.

For broader MCQ technique that applies across all SQE1 subjects, see our SQE1 MCQ technique and exam strategy guide.

Common SQE1 Trusts Mistakes

Confusing Resulting and Constructive Trusts

A resulting trust returns beneficial interest to the contributor. A constructive trust gives effect to the parties' common intention or to fiduciary duty. The two arise on different facts and produce different proportions. Do not treat them as interchangeable.

Misapplying Hunter v Moss to Tangible Goods

Hunter v Moss relaxes the segregation requirement only for fungible intangibles (most commonly shares). For physical goods, Re London Wine still requires segregation or appropriation.

Treating Pre-FHR Authorities as Good Law

Sinclair v Versailles and the older personal-remedy line on bribes were overruled in FHR European Ventures. A bribe received in breach of fiduciary duty is now held on constructive trust — proprietary remedy available.

Forgetting the Twinsectra/Barlow Clowes Path

The dishonest assistance test is objective dishonesty (Tan; Barlow Clowes; Group Seven; Ivey). The brief Twinsectra subjective limb has been disapproved.

Misreading the Limitation Act

For breach of trust, limitation is generally six years (LA 1980 s.21(3)). But there is no limit for fraudulent breach (s.21(1)(a)) or recovery of trust property still in the trustee's hands (s.21(1)(b)).

Applying the Old TA 1925 s.32 Cap

The Inheritance and Trustees' Powers Act 2014 removed the half-share cap on advancement. A pre-2014 textbook will still mention it; the SQE1 will not reward you for citing it.

How to Structure Your Trusts Revision

A four-week trust-focused block is realistic if you have already covered the foundations. Adjust if your runway is shorter or longer.

Week 1: Express Trusts Foundations

Three certainties, formalities, constitution. Do every fact pattern in our Trusts study notes on these topics. Build flashcards for each leading case.

Week 2: Resulting and Constructive Trusts

Drill the family-home line through Stack and Jones. Map Pallant v Morgan, FHR, and Pennington v Waine against the institutional/unconscionability axis.

Week 3: Trustees and Beneficiaries

Statutory duty of care, investment, advancement, maintenance. Pair with breach of trust and tracing — they share the Foskett / Target / AIB analytical frame.

Week 4: Practice and Mocks

Switch to almost pure question practice. Use practice questions for topic-by-topic drilling, then a full mock exam paper. For every wrong answer, write a flashcard under the SQE1 flashcard strategy.

Final Thoughts

Trusts Law is the most logically structured subject on FLK2. There is a right answer to every question and the framework that produces it is short. Memorise the leading cases, drill the three certainties, learn the TA 2000 numbering, and the subject becomes a reliable scoring area rather than a feared one.

• Test where you stand with our free readiness quick quiz
• Drill the leading cases with our trusts flashcards, built for spaced repetition
• Build the framework with our trusts study notes
• See full course options on our pricing page
• Pair with our SQE1 land law revision guide for full FLK2 coverage on property-side topics
• Sharpen your single-best-answer technique with our SQE1 MCQ technique guide

Get the framework right, learn the cases that anchor it, and trust your preparation. Good luck with your trusts revision for SQE1 in 2026.