An express trust is a trust that is intentionally created by the settlor, usually by a deed or a will, in which the settlor declares that specified property is to be held on trust for identified beneficiaries. Express trusts are the most straightforward category of trust and arise where the settlor has deliberately set out the terms of the trust. They are to be contrasted with implied trusts (resulting and constructive trusts), which arise by operation of law irrespective of the settlor's intention.
Express trusts are a fundamental vehicle for managing wealth, protecting assets, and providing for others. They are used extensively in wills, family arrangements, commercial transactions, and charitable giving. For the SQE, you must understand the requirements for creating a valid express trust because a failure to satisfy any of the three certainties means the trust simply does not exist. The property will either pass as an outright gift, be held on resulting trust for the settlor, or fail entirely.
| Feature | Express Trust | Implied Trust (Resulting/Constructive) |
|---|---|---|
| Source | Deliberately created by settlor | Imposed by law based on presumed or inferred intention |
| Form | Usually by deed or will | Arises automatically by operation of law |
| Intention | Settlor expressly declares intention | Intention is presumed (resulting) or imposed (constructive) |
| Certainty requirements | Full three certainties must be satisfied | Three certainties still needed for resulting trusts; constructive trusts have different requirements |
| Common examples | Family settlements, will trusts, charitable endowments | Resulting trust on failed gift, constructive trust on fraud |
The first certainty requires that the settlor intended to create a trust rather than make a gift or impose a mere moral obligation. The key question is: did the settlor use words that show an intention to impose a binding obligation on the trustee to hold property for the benefit of another? If the words used are merely precatory (expressing a wish or desire), a trust will not be created. The court examines the language used in its context to determine the settlor's intention.
This is the leading case on certainty of intention. Mr Constance told his mistress, Mrs Paul, that "this money is as much yours as mine" and that she could draw on it when she needed to. The court held that despite the informal language, these words showed a clear intention to create a trust in Mrs Paul's favour. This case demonstrates that the court does not require magic words — any language that shows an intention to impose a binding obligation is sufficient, however informal it may be.
For the SQE, remember that the settlor does not need to use the word "trust" or any other particular terminology. The court looks at the substance of what was said and done. Phrases like "I hold this for X", "this is as much yours as mine", or "I want you to look after this for the children" can all be sufficient depending on the context.
Historically, courts were reluctant to find a trust from precatory words (words expressing a wish, hope, or desire rather than a command). In Lambe v Eames (1871), the testator left property to his widow "in full confidence that she will do what is right as to the disposal thereof". The court held this was NOT a trust — it was merely a wish that imposed no binding obligation. However, in Re Adams and the Kensington Vestry (1884), the testator left property to his wife "in full confidence that she will do what is right". The court this time held that the words DID create a trust, distinguishing Lambe v Eames on the basis that a trust for a sole beneficiary who also receives the legal estate is effective because she can do no wrong to herself.
A statement like "I hope you will look after my mother" or "I would like you to provide for the children" is generally a moral obligation only and does NOT create a binding trust. The settlor must intend to impose a legally enforceable obligation. Distinguish between cases where the settlor is merely expressing a wish and cases where, despite informal language, there is a genuine intention to create binding obligations (Paul v Constance).
In commercial dealings, it is generally more difficult to find an intention to create a trust because parties are presumed to be dealing at arm's length and creating legal rights and obligations, not equitable ones. In Re Kayford Ltd (1975), a mail-order company facing potential insolvency separated customer payments into a designated "customers' trust deposit account". The court held that the company's intention to keep these funds separate showed a trust intention in favour of the customers. This demonstrates that even in commercial contexts, clear acts of segregation can demonstrate trust intention.
If the settlor intends to make a gift but the transfer is incomplete, the property does not pass to the intended donee. In Milroy v Lord, Turner LJ stated: "He must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him." The settlor must have taken all steps necessary to transfer the legal title. If the transfer is incomplete, the result depends on whether the settlor also intended to create a trust — if so, the property is held on resulting trust for the settlor.
A donatio mortis causa (DMC) is a deathbed gift made in contemplation of imminent death. Three requirements must be satisfied: (1) the donor must intend to make a gift that will take effect only on death; (2) the gift must be made in contemplation of death (though not necessarily death from a specific illness); and (3) there must be delivery of the subject matter of the gift (or the means of control, such as a key to a safe). If all three requirements are met, the gift takes effect on the donor's death even though it would otherwise fail as an imperfect inter vivos gift.
A trust imposes a mandatory obligation on the trustee to distribute property to the beneficiaries. A mere power gives the trustee discretion to distribute or not. In Re Gulbenkian's Settlement Trusts, the settlor directed trustees to pay income to his wife for life, and on her death to appoint the capital to "such person or persons at such time or times and in such manner as my wife shall by deed or will appoint". The House of Lords held this was valid because, even though the objects of the power were uncertain, it was a power (not a trust) and powers only require certainty among the "any given postulant" test. A trust must be certain; a power only needs to be administratively workable.
Ask yourself: is the trustee OBLIGED to act (trust), or does the trustee have a CHOICE (power)? If the words are "shall distribute to X" it is likely a trust. If the words are "may distribute to X" or "shall distribute to such persons as my wife shall appoint" it is likely a power. This distinction is critical because the certainty requirements differ significantly.
Certainty of subject matter has two limbs. First, the trust property itself must be certain — it must be possible to identify what property is held on trust. Second, the beneficial interest must be certain — it must be possible to define what share or interest each beneficiary is entitled to. If either limb fails, the trust is void.
Customers of a wine company paid for wine that was stored in a warehouse. When the company became insolvent, the customers claimed their wine was held on trust for them. The court held that no trust could exist because the wine was stored in bulk — the customers' bottles were not separated or identifiable from the rest of the warehouse stock. Since the specific bottles could not be identified, the trust property was insufficiently certain. The customers were mere unsecured creditors.
This case followed Re London Wine. Customers paid for gold bullion that was stored in a vault. Some customers received certificates identifying specific gold; others did not. The Privy Council held that customers without certificates had no trust because the gold was not segregated or identifiable. However, the position is different if the gold can be identified — e.g., if it is separately stored or clearly marked as belonging to a particular customer.
The issue arose whether clients of Lehman Brothers could claim that their entitlements under client asset agreements created a trust over specific shares. The court held that where shares are held in a mixed pool, it may still be possible to identify the client's property by a process of tracing and identification, even though the shares are not physically segregated. This represents a more flexible approach than Re London Wine for intangible property, though the underlying principle of identification remains.
A direction that property be held on trust for a beneficiary to receive "a reasonable income" or "such part as the trustee thinks fit" may be insufficiently certain because the beneficiary's share is not defined. In Re Golay's Will Trusts (1965), the testator directed trustees to pay the beneficiary "a reasonable income". The court held this was sufficiently certain because the trustees had a standard of reasonableness to apply — it was evidentially uncertain but not conceptually uncertain. Contrast this with cases where no objective standard exists to measure the share.
The test for certainty of objects depends on the type of trust. For a fixed interest trust (where each beneficiary has a defined share), the "complete list" test applies — it must be possible to draw up a complete list of all beneficiaries. For a discretionary trust (where trustees have discretion over who benefits), the lower "any given postulant" test from McPhail v Doulton applies — it must be possible to say whether any given individual is or is not within the class of beneficiaries.
For fixed interest trusts, the class of beneficiaries must be closed and defined so that it is possible to draw up a complete list of every person who is entitled. In Morice v Bishop of Durham (1805), Sir William Grant stated: "There can be no trust without a beneficiary." The certainty requirement ensures that every person with a vested interest can enforce the trust. If the class is too wide or nebulous (e.g., "my friends" without further definition), the trust fails for uncertainty of objects.
The House of Lords established a new, more flexible test for certainty of objects in discretionary trusts. Lord Wilberforce held that it is sufficient if "it can be said with certainty that any given individual is or is not a member of the class". The trustees do not need to be able to draw up a complete list of all beneficiaries — they only need to be able to determine, for any particular person who comes forward, whether that person falls within the class. This is known as the "any given postulant" test or the "is or is not" test.
In Re Baden, the Court of Appeal considered McPhail v Doulton and identified three possible tests for certainty of objects in discretionary trusts: (1) the "is or is not" test — can you say whether any given person is in or out of the class? (2) the "any given postulant" test — can you say whether any given claimant is within the class? (3) the "class can be ascertained" test — can the entire class be identified with certainty? The court ultimately preferred the "is or is not" test from McPhail. If it is conceptually certain who is in the class, the trust is valid even if it would be administratively difficult to find all members.
| Test | Description | Result if Satisfied | Result if Failed |
|---|---|---|---|
| "Is or is not" test (preferred) | Can you say for any given individual whether they are or are not a member of the class? | Trust is valid | Trust is void |
| "Any given postulant" test | Can you determine whether any person claiming is within the class? | Trust is valid | Trust is void |
| "Class can be ascertained" test (most stringent) | Can you draw up a complete list of all members of the class? | Trust is valid | Trust is void |
This is a crucial distinction for the SQE. Conceptual uncertainty exists where the definition of the class is inherently vague or subjective — for example, "such of my relatives as are in need" involves a subjective assessment of need. Evidential uncertainty exists where the class is conceptually clear but it may be difficult in practice to gather all the evidence needed to identify every member — for example, "all my descendants living at my death" is conceptually clear even though finding every descendant might require extensive genealogical research. Only conceptual uncertainty invalidates a trust; evidential uncertainty does not.
A trust is only void if the uncertainty is CONCEPTUAL — meaning the definition of the beneficiary class is inherently vague or meaningless. If the class is conceptually clear but simply hard to identify in practice (evidential uncertainty), the trust is valid. In McPhail v Doulton, Lord Wilberforce stated that "a trust for employees (past and present) and their relatives" was conceptually certain even though identifying all such persons might be difficult in practice.
In Re Gulbenkian's Settlement Trusts, the objects of a power of appointment were described as "such person or persons at such time or times and in such manner as my wife shall by deed or will appoint". The House of Lords held this was valid because, although it was not possible to know who the ultimate beneficiaries would be until the wife exercised her power, the class was conceptually certain — any given person could be said to be a person whom the wife could or could not appoint. The uncertainty was merely evidential, not conceptual.
In a fixed interest trust (sometimes called a vested interest trust), each beneficiary has a defined and ascertainable share of the trust property. For example, a settlor may direct that property be held equally for A, B, and C. Each beneficiary has a vested proprietary interest in the trust property from the moment the trust is created. The trustee has no discretion over how much each beneficiary receives — the shares are fixed by the terms of the trust.
In a discretionary trust, the trustees have full discretion over which beneficiaries receive income or capital, and in what proportions. No individual beneficiary has a vested proprietary interest in any specific part of the trust fund — they merely have a right to be considered by the trustees. The trustees may distribute to one beneficiary and not another, or vary the amounts over time. This makes discretionary trusts highly flexible, which is why they are commonly used in family arrangements and tax planning.
| Feature | Fixed Interest Trust | Discretionary Trust |
|---|---|---|
| Beneficiary's interest | Vested proprietary interest in a defined share | Mere right to be considered; no proprietary interest until selection |
| Trustee discretion | None — shares are fixed by the trust instrument | Full discretion over who benefits and in what proportions |
| Certainty of objects test | Complete list test — must be able to list all beneficiaries | "Any given postulant" test — must be able to say whether any person is in or out |
| Saunders v Vautier | Beneficiaries (if all sui juris and together absolutely entitled) can terminate the trust | Cannot apply — no single beneficiary is absolutely entitled |
| Variation | Individual beneficiaries can vary their own shares | Courts can vary under the Variation of Trusts Act 1958 |
| Tax treatment | Generally taxed as income in the beneficiary's hands | Trustee is taxed at the trust rate; potential tax advantages |
| Flexibility | Less flexible — shares are predetermined | Highly flexible — trustees can respond to changing circumstances |
| Insolvency of beneficiary | Beneficiary's share forms part of their bankruptcy estate | No proprietary interest for trustee in bankruptcy to seize |
The rule in Saunders v Vautier provides that if all beneficiaries are sui juris (adult and of sound mind) and together are absolutely entitled to the trust property, they may collectively require the trustee to transfer the trust property to them, even if this defeats the settlor's intentions. This applies only to fixed interest trusts where the beneficiaries' shares are fully vested and ascertainable. It does NOT apply to discretionary trusts because no individual beneficiary is absolutely entitled to any specific share.
In an SQE question, the type of trust (fixed or discretionary) will determine which certainty test applies. Look for language like "equally between A and B" (fixed) versus "among such of my family as the trustees shall select" (discretionary). Also note that in a discretionary trust, if all possible beneficiaries are sui juris and unanimously agree, they can collectively terminate the trust under Saunders v Vautier — but this is practically very rare since it requires all potential beneficiaries to agree.
A trust is incompletely constituted when the settlor has expressed an intention to create a trust but has not transferred the legal title to the trustee. For example, if A declares "I hold my house on trust for B" but has not executed a deed of transfer or delivered the title deeds to a trustee, the trust is incompletely constituted. The general rule is that equity will not assist a volunteer — a person who has not given consideration cannot enforce an incompletely constituted trust.
The maxim "equity will not assist a volunteer" means that a person who has not provided consideration (i.e., has not given something of value in exchange) cannot compel the settlor to complete the transfer of property to the trust. If A promises to create a trust for B but never completes the transfer, B (as a volunteer) cannot go to court to enforce the promise. This is because the trust is a matter of conscience and equity will not act unless the person seeking relief has done something to deserve it.
In Milroy v Lord, the settlor attempted to transfer shares to a trustee by endorsing the share certificates and handing them over, but the transfer was never registered with the company. The court held that the transfer was incomplete and the trust failed. Turner LJ stated the key principle: the settlor must have done everything necessary to transfer the property. If the settlor has chosen one method of transfer and it fails, they cannot rely on another method. This case is the foundation of the rule that a trust is void if the settlor has not completed the transfer of legal title.
In Re Rose, the settlor executed a transfer of shares to trustees and handed over the share transfer forms, but the company had not yet registered the transfer. The court held that the trust WAS constituted even though the transfer was not yet registered on the company's register. The reason was that the settlor had done everything in his power to effect the transfer — registration was a mere formality. Once the settlor has done everything necessary that is within his power, the trust is constituted even if a third party (such as a company) still needs to take some administrative step to complete the legal transfer.
The apparent conflict between Milroy v Lord (transfer incomplete, trust fails) and Re Rose (transfer complete even without registration) is a common exam topic. The key distinction is: in Re Rose, the settlor had done everything within his power — only the company's administrative act remained. In Milroy, the settlor had not taken the necessary steps (the shares were not properly transferred). If the settlor has irrevocably done everything they can, the trust may be complete even if legal title has not yet passed.
Proprietary estoppel can operate to prevent a settlor from going back on a promise to create a trust, even where the trust is technically incompletely constituted. The elements are: (1) a promise or assurance that property will be held on trust for the claimant; (2) the claimant has relied on that promise to their detriment; and (3) it would be unconscionable (unfair) to allow the settlor to go back on the promise. If all three elements are satisfied, the court may enforce the trust or award compensation to the claimant. This is a common law and equitable doctrine that operates as an exception to the rule that equity will not assist a volunteer.
It is important to distinguish between an incomplete gift and an incompletely constituted trust. If the settlor intends to make an outright gift (not a trust) but the transfer is incomplete, the property remains with the settlor — there is no resulting trust because there was never an intention to create a trust in the first place. If the settlor intends to create a trust but the transfer to the trustee is incomplete, the property is held on resulting trust for the settlor (because the settlor did not intend a gift to the trustee). In both cases, the intended recipient gets nothing.
Step 1: Identify the settlor's words or conduct — what was said or done?
Step 2: Certainty of intention — do the words show an intention to create a binding trust (not a mere wish or moral obligation)? Apply Paul v Constance and distinguish from Lambe v Eames.
Step 3: Certainty of subject matter — can the trust property be identified? Can the beneficiary's share be defined? Apply Re London Wine and Re Golay.
Step 4: Certainty of objects — is it a fixed interest or discretionary trust? Apply the complete list test (fixed) or the any given postulant test (discretionary). Consider Re Baden and the conceptual vs evidential distinction.
Step 5: Is the trust completely constituted? Has legal title been transferred? If not, does an exception apply (Re Rose, proprietary estoppel)?
Step 6: If any certainty fails, the trust is void — consider resulting trust or outright gift as alternative outcomes.