Equity refers to ‘a form of social fairness or a branch of morality or even an aspect of divine justice’ leading to a departure from the general rules applied in law in the interest of pursuing justice in particular cases. More specifically, equity’s function is to modify the common law rules where to apply them strictly would cause injustice. Thus, even though there are formal rules in equity in order to enhance its integrity, such principles are kept broad so as to allow courts to achieve more perfect justice. A clear example of such rules is the three certainties which are necessary in order for a trust to be valid. These certainties involve the application of broad doctrines with the purpose of enabling judges to concoct innovative solutions to problems.
Certainty of Intention
It is essential for the settlor to intend to create a trust in order for it to be enforced. This is a very simple rule that does not require specific words to be used in a trust deed. Consequently, it is broad, requiring the court to look at the framework of the parties involved and concentrate on their conduct.
The courts will generally ‘construe words within the particular context to determine whether or not a trust was intended’. The best example is Paul v Constance where it was held that there was an express trust even though Constance did not know he was creating one. Moreover, there are cases which illustrate that ‘the court is uncovering an express trust rather than imposing a constructive trust’; for example, Re Kayford. The case proves that certain words spoken and certain conduct can show that a trust was intended.
Moreover, the finding of an intention to create a trust is also based on the surrounding circumstances. If there is insufficient certainty of intention, then a gift takes effect as a perfect gift. In Jones v Lock, the court examined the intentions of the father and held that his intention was ‘either to make a gift, or simply to make a point to his wife’.
As a result, the courts take the wide rule of intention and manipulate it so as to apply in situations where on first sight it may be impossible to deduce that there was actually an intention. This is because the judges are concerned with adjusting the rules so as to respond to moral questions and hence equity intervening and preventing unconscionable actions.
Certainty of subject-matter
Furthermore, a tendency on the part of the judges to the bend rules in trusts law can be vividly seen in the principle that the property in a trust fund has to be segregated from all other property so that its identity is sufficiently clear. There are two aspects to this requirement: first, certainty as to what property is to be held upon trust and secondly, certainty as to the extent of the beneficial interest of each beneficiary. More specifically, ‘the trustees must know exactly what is and what is not included in the trust’ failure to deal with the property sufficiently might lead to a breach of trust. Also, 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 property’.
As to certainty of beneficial interests, the case of Boyce v Boyce established that when there is clear intention to create a trust but only uncertainty as to the beneficial interests, a resulting trust to the donor’s estate will take effect. Resulting trusts are implied by the court so as to prevent unconscionable dealings with a property. These arise when a person makes a contribution to the purchase price of property or when the settlor has transferred legal title of the property but failed to identify the beneficiaries. Consequently, equity creates rules so as to respond to moral questions and is concentrated in enforcing justice rather than applying the rules.
Moreover, the general principle in certainty of subject derives from Re London Wine Co which held that where wine had not been segregated there would not be any proprietary rights over any wine stored in the cellar. This is the orthodox approach acknowledging that ‘property rights must attach to some property’. The strictness of the application of such approach is exhibited in Re Goldcorp relating to uncertainty of subject matter arising from a contract of sale where no specific gold had been allocated to any particular purchaser. The particular ‘harshness of the ruling in this case’ is emphasized through an individual customer who even though had ordered ‘rare and easily identifiable coins’, the coins had not been physically segregated from other coins and so his claim failed.
Nonetheless, despite a purportedly rigorous rule regarding certainty of subject, Hunter v Moss implies that there is no concrete precedent in equity and trusts law. Instead, despite the presence of rules, the court adopts different views according to the fact-situation of each case. Hunter established a distinction between tangible and intangible, underpinning that the ‘requirement of certainty does not apply in the same way to trusts of intangible assets’. Even though one would have expected that the purported trust of 50 shares for Hunter would have failed ‘especially when he was not a purchaser but a donee’, the CA accepted that ordinary shares should be treated differently as each unit is indistinguishable from another unit. Re Goldcorp was distinguished in Hunter and later in Re Harvard Securities on the basis that shares are a special case because they are chattels. Thus ‘the question of certainty depends not on the application of any immutable principle based on the requirements of a need for segregation or appropriation, but rather on whether, immediately after the purported declaration of trust, the court could, if asked, make an order for the execution of the purported trust’.
On the other hand, it is important to note that in general ‘equity is reluctant to interfere in commercial contracts by finding a fiduciary relationship to exist’. For example, the decision in MacJordan Construction Ltd  reflects the idea that a company cannot create a trust of its money until it has segregated the amount supposed to be subjected to the trust. Therefore, although there is a formal general rule, the courts would look at the circumstances of the case and overall whether there is intention to create a trust. In practice, ‘the question of certainty of subject is often associated with that of certainty of words’.
The last point is further emphasized through a recent decision: Re Lehman Bros International (Europe) (No 2). The case involved the insolvent Lehman Brothers and the poorly drafted regulations in Part 7 of the Financial Services Authority rulebook ‘CASS’. The question arose, inter alia, as to whether there was a valid trust imposed over the moneys held in a general account in favour of the clients. The CA held ‘that the regulations should be interpreted as providing for the creation of one large trust under which all the CASS customers had equitable interests’. The decision is fully harmonized with the trend created by the Australian court in White v Shortfall in which, explicitly, Dillon LJ’s approach in Hunter v Moss was rejected. Instead, the judges took the view that a single trust should be created over the 1,500,000 shares. Consequently, suffice it to say that out of precise rules the courts are trying to deal with moral questions in the best way possible so as not to offend the principles developed and also to follow the maxim that equity does not aid a party at fault.
Certainty of objects
In order to promote conscionability in that the property should go to its rightful owners, for a trust to be valid there must be sufficient certainty of the beneficiaries. Firstly, trustees need to identify the nature of the power which is being exercised and then move on to establish the beneficiaries. Because the tests that determine whether beneficiaries should be included in the trust differ for each type of trust, this might give the idea that the rules are fixed and hence, equity is concerned primarily in following them. The reality, though, is quite the opposite. The courts have been creative in reforming the tests in order to be flexible and easily manoeuvred.
With relevance to a fixed trust, the solution is always straightforward; the trust provision requires that the property is held for a fixed number of beneficiaries. As a result, the beneficiaries must be able to ‘draw up a complete list of all the beneficiaries’ and hence follow the class ascertainability rule. The test was established in IRC v Broadway Cottages further emphasizing that ‘if there are any objects about whom the trustee could not be certain… then the trust will be void for uncertainty’.
Furthermore, discretionary trust involves a situation where the trustees are given discretion as to how to exercise their obligations. Its test arose out of McPhail v Doulton and the trust would only be valid ‘if it can be said with certainty that any given individual is or is not a member of the class’. The rationale behind this test is that ‘if a settlor never intended equal distribution of a fund among the beneficiaries, then the trustees would not need a list of all beneficiaries in order to make distribution’.
The HL in McPhail adopted the is or is not test set out in Re Gulbenkian though its application encountered problems; specifically ‘the presence of a single postulant who could not be categorised as being or not being within the class of beneficiaries would invalidate the trust’. As a result, the CA sought to mitigate the effect of McPhail in Re Baden (No 2). Following Re Baden, the onus is placed on the claimants to prove whether they are beneficiaries under the terms of the trust. Also, Megaw LJ held that the trust would be valid despite some potential uncertainties as to a number of postulants, provided that there were a substantial core number of beneficiaries who could be said to satisfy the terms of the trust. Consequently, Re Baden, ‘ostensibly does not change the basic configuration’ of the ascertainability test. Rather, it ‘recognizes a presumption, which operates at the time the trustee acts, to aid in distinguishing which persons “have” the attributes required by the terms of the definition’. As a result, the judges build on the general rule found in Broadway Cottages and evolve the test regarding discretionary trusts in order to be able to ensure that conceptual certainty exists and that those individuals who rightly deserve to benefit from the trust would benefit.
The more difficult category though is where ‘a trustee ‘is granted a “mere power” which is not a fully-fledged trust obligation but which gives the holder of the power the ability to exercise that power without any obligation to do so’. The leading case is Re Gulbenkian which established the is or is not test. However, the shortcoming of this test is that ‘trusts which are certain as to 99 per cent of postulants may fail because one per cent of postulants are of a sort which are difficult to reconcile with the definition of the class of objects provided for under the terms of the trust’, making the test a relatively strict one. In Re Barlow the court attempted to alleviate this harshness. The case involved a testatrix who provided an option for any of her family or friends to purchase paintings at a specifically low price, a term which under the application of Gulbenkian would undoubtedly hold the trust as invalid. Nevertheless, the bequest was found to be valid. This was because on the facts of that case, the trust was construed as a series of individual gifts.
Consequently, both tests require conceptual certainty; the former such that the whole class might be identified and the latter such that, a court could say of any person whether he/she is within the class of beneficiaries. Ultimately, ‘it is in the power of the courts to give effect to discretionary trusts, and therefore, for them to say that unless the language is “precise”’ they cannot enforce a trust. However, it must be a very rare case in which the language is eccentric so that a court is incapable of identifying beneficiaries. This leads to a general idea that the courts are primarily concerned with answering moral questions instead of applying formal rules.
To conclude, an analysis regarding the function of the three certainties shows that although seemingly involving rigorous doctrines, equity is much more than that. The judges try to twist the rules in order to fix injustices. Equity’s existence does not conflict common law or automatically abolish legal rules; equity creates limited exceptions to the rules so as to ‘smooth away the sharp edges where the law causes injustice and fill in the holes where the legal remedies are inadequate’. Its role is to intervene when the application of strict common law rules will cause injustice in individual cases; hence, it would not be prudent for trusts law to adopt analogous rigid rules that would themselves create injustice. Certainly, in order for equity to exist and persist as a branch of law, principles have to be developed though such principles are wide in nature in an attempt to eradicate unconscionable tendencies.
 Gary Watt, Todd & Watt’s Cases and Materials on Equity and Trusts (8th edn, OUP 2011) 3
 Margaret Halliwell and Claire de Than, Equity and Trusts (5th edn, Old Bailey Press 2005)
  1 WLR 527
 Alastair Hudson, Equity and Trusts (7th edn, Routledge 2012) 94
  1 WLR 279
  1 Ch App 25
 Hudson, Op. Cit., 94
Halliwell & Claire, Op. Cit., 22
 Boyce v Boyce  16 Sim 476
 Re London Wine Co. (Shippers) Ltd  PCC 12
 Hudson, Op. Cit., 118
 Re Goldcorp Exchange Ltd  1 AC 74
 Halliwell & Claire, Op. Cit., 23
 Hudson, Op. Cit., 118
  1 WLR 452
 Philip, Op. Cit., 51
 David Hayton, ‘Uncertainty of subject-matter of trusts’  LQR
  2 BCLC 369
 Hayton, Op. Cit.
 Halliwell & Claire, Op. Cit., 23
 MacJordan Construction Ltd v Brookmount Erostin Ltd  56 BLR 1 CA
 Philip, Op. Cit., 52
  EWCA Civ 1161
 FSA Handbook Client Assets 7
 Hudson, Op. Cit., 138
  NSWSC 1379
 Halliwell & Claire, Op. Cit., 24
  Ch. 20
 Hudson, Op. Cit., 151
  UKHL 1
 McPhail v Doulton  3 All E.R. at 246 (Lord Wilberforce)
 Halliwell & Claire, Op. Cit., 26
  AC 508
 Hudson, Op. Cit., 157
  EWCA Civ 10
 Dennis R. Klinck, ‘McPhail v Doulton and Certainty of Objects: A ‘Semantic Criticism’  20 Ottawa Law Review 377-401
 Hudson, Op. Cit., 151
 Ibid., 154
  1 WLR 278
 Klinck, Op. Cit.
 Watt, Op. Cit., 7
Boyce v Boyce  16 Sim 476
Jones v Lock  1 Ch App 25
Hunter v Moss  1 WLR 452
IRC v Broadway Cottages  Ch. 20
MacJordan Construction Ltd v Brookmount Erostin Ltd  56 BLR 1 CA
McPhail v Doulton  3 All E.R.
Paul v Constance  1 WLR 527
Re Baden (No 2)  EWCA Civ 10
Re Barlow  1 WLR 278
Re Goldcorp Exchange Ltd  1 AC 74
Re Gulbenkian  AC 508
Re Harvard Securities  2 BCLC 369
Re Kayford  1 WLR 279
Re Lehman Bros International (Europe) (No 2)  EWCA Civ 1161
Re London Wine Co. (Shippers) Ltd  PCC 12
White v Shortfall  NSWSC 1379
Statutes and Statutory instruments
Financial Services Authority Handbook, Client money rules, CASS 7
Halliwell M. and Than C., Equity and Trusts (5th edn, Old Bailey Press 2005)
Hudson A., Equity and Trusts (7th edn, Routledge 2012)
Pettit P., Equity and the law of trusts (11th edn, OUP 2009)
Watt G., Todd & Watt’s Cases and Materials on Equity and Trusts (8th edn, OUP 2011)
David Hayton, ‘Uncertainty of subject-matter of trusts’  LQR
Dennis R. Klinck, ‘McPhail v Doulton and Certainty of Objects: A ‘Semantic Criticism’  20 Ottawa Law Review 377-401