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My Revision SQE FLK > Equity Flashcards > Flashcards

Equity Flashcards

1
Q

What is the definition of a Trustee?

A

Legal ownership

A trustee holds the legal title to trust property.

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2
Q

What is the role of a Beneficiary?

A

Equitable and beneficiary ownership

Beneficiaries have rights to benefits from the trust.

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3
Q

What does the term ‘Equity’s darling’ refer to?

A

Subsequent purchaser for value always takes free, not bound

This concept protects bona fide purchasers.

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4
Q

What is the difference between Active and Passive duties of trustees?

A

Bare trust is passive; active management involves exercising dispositive & investment powers

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5
Q

What are the types of trusts?

A
  • Express trusts
  • Implied Trusts
  • Resulting Trusts
  • Constructive Trusts
  • Institutional constructive trusts
  • Remedial constructive trusts
  • Common intention Constructive trusts
  • Quistclose trusts
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6
Q

How does Equity compare to Debt?

A

Equity has a proprietary remedy

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7
Q

What is required for Self-Declaration of Trusts?

A

No formality for constitution

Only property subject to the trust requires formality.

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8
Q

What is the Milroy principle?

A

Equity will not assist volunteers

Volunteers are those who do not provide consideration.

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9
Q

What does the Re Rose principle state?

A

Assists volunteers only when they have put the matter beyond their control

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10
Q

What is the Mascall extension to the Re Rose principle?

A

Not necessary for the transferor to send documents to the person capable of completing it, as long as the correct method is used

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11
Q

What triggers the unconscionability doctrine in Pennington v Waine?

A

A promise is made and a transfer is signed and/or publicised accordingly

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12
Q

What are the requirements for a valid immediate gift under Strong v Bird?

A
  • Intention to make an immediate gift
  • Gift made to an Executor or Representative
  • Continuing intention until the donor’s death
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13
Q

What is the DMC principle regarding conditional gifts?

A

Gift made in contemplation of death, donor believes death is imminent, constructive delivery of property

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14
Q

What is the age requirement to request a severance of rights under the Saunder v Vautier Rule?

A

18 years old

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15
Q

What are the three certainties necessary for a trust?

A
  • Certainty of intention
  • Certainty of subject matter
  • Certainty of objects
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16
Q

What is the beneficiary principle?

A

The ‘object’ of a trust must always be a legal person to be capable of being enforced

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17
Q

What must be demonstrated for certainty of intention?

A

An external manifestation of intention as to gift or transfer by trust

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18
Q

What happens if there is a lack of certainty in fixed trusts?

A

Uphold the valid parts of the trust at the very least

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19
Q

What is required for the transfer of legal title in gifts?

A

Written transfer + written notice for debts and money; signed writing for real property

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20
Q

What does s.53(1)(b) require for express trusts?

A

Some signed writing for evidential requirement (for land)

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21
Q

What is the effect of a failure to evidence a Self-Declared Trust in writing?

A

It does not make it void, merely unenforceable

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22
Q

What is the rule for intangible assets in creating a valid trust?

A

Do not need to be separated from the bulk of assets

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23
Q

What is a sham trust?

A

Legally problematic; rights of the beneficiary depart from the real agreement

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24
Q

What is the effect of lack of certainty in discretionary trusts?

A

Everything has to fail, cannot uphold just certain parts

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25
Q

What is the intention behind a physical act of delivery in relation to ownership?

A

Accompanying the intention with a physical act of delivery or a change of possession.

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26
Q

What is required for a charitable purpose trust to be valid?

A

Must meet the legal definition of charity, enforced by the A-G or Charity Commission, and meet the three certainties.

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27
Q

What are the four Endacott anomalous exceptions for private purpose trusts?

A
  • Specific animals
  • Private monuments and graves
  • Private masses for other purposes
  • Unincorporated association
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28
Q

What is the consequence of a failed private purpose trust?

A

Fatal; they cannot be severed or separated, leading to everything failing.

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29
Q

What are the three requirements for a charity to attain charitable status?

A
  • Charitable purposes within 12 heads of charity
  • Satisfy the public test
  • Be wholly and exclusively charitable
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30
Q

What are the 12 heads of charity?

A
  • Poverty
  • Education
  • Religion
  • Health & lives
  • Community & citizenship
  • Arts, culture, heritage, science
  • Amateur sport
  • Environment
  • Youth, age, ill-health, disability, financial hardship
  • Animal welfare
  • Emergency services
  • Others within the spirit of the Act
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31
Q

What is the public benefit test for charities?

A

Must have an identifiable benefit and benefit the public or a section thereof.

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32
Q

True or False: Charging money for services deprives a charity of the public benefit element.

A

False; it does not deprive the charity of public benefit as long as it is reasonable and necessary.

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33
Q

What is the Cy-Pres Doctrine?

A

Applies when there is a ‘general charitable intention’; useful when a gift to charity fails.

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34
Q

What is the rule against remoteness in vesting?

A

125 years; applies to future vesting and interests that do not take effect immediately.

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35
Q

What is the rule against alienability?

A

21 years; a valid non-charitable “i.e private” purpose trust must end within this time.

(Charitable purpose trusts are exceptions they do not comply with the perpetuity rules)

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36
Q

What are automatic resulting trusts?

A

Arise when the transfer of property wholly or partially fails but the property has been transferred to the intended trustee.

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37
Q

What is the presumption of advancement?

A

Assumes a gift in certain relationships, such as husband to wife or parent to child.

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38
Q

What is required to establish a common intention in family homes?

A

Inducement, reliance (detriment), and a common intention.

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39
Q

What is the ‘wait and see’ rule?

A

Applies when it is not clear from the outset that property will vest within the perpetuity period.

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40
Q

What are the stages in the qualification process for family homes?

A
  • Show beneficial interest acquired under a CIT in land
  • Inducement
  • Reliance
  • Common intention
41
Q

What are the remedies available in proprietary estoppel?

A

Can be financial or non-financial.

42
Q

What must be demonstrated for a proprietary estoppel claim to succeed?

A
  • Assurance
  • Detriment
  • Reliance
  • Unconscionability
43
Q

What is required for a trustee’s removal?

A

By the terms of the trust instrument, statutory powers, common law powers, or by court or Charity Commission.

44
Q

What is the role of the Charity Commission regarding trustees?

A

Has the statutory power to appoint trustees.

45
Q

What are administrative powers of trustees?

A
  • Comply with the trust terms
  • Safeguard the trust property
  • Duty to invest
46
Q

What is the fiduciary duty of trustees regarding conflicts?

A

No conflict; not to use trust property in a position of conflict.

47
Q

What is the difference between vested in possession and vested in interest?

A

Vested in possession is more long-lasting, while vested in interest is fleeting.

48
Q

What is the ‘No profit’ rule in fiduciary duty?

A

Do not profit from using trust property to make a personal gain or profit.

49
Q

Define ‘Vested interest’.

A

An interest can either be vested in possession (long-lasting current possession) or vested in interest (fleeting in the future).

50
Q

What are ‘maintenance powers’?

A

Powers allowing trustees to provide earlier provisions to beneficiaries regarding income or capital.

51
Q

What does ‘prior interest’ mean?

A

A primary interest as a beneficiary, with subsequent beneficiaries having secondary interests.

52
Q

What is the Power of Advancement?

A

To advance capital or income for the benefit of the beneficiary before becoming absolutely entitled.

53
Q

When is advancement allowed? When is it acceptable?

A

When beneficiaries’ interests are separate, severable, and not contingent.

54
Q

How much can be paid under the Power of Advancement?

A

There is no cap limit; up to 100% of the requesting beneficiary’s own share can be paid.

55
Q

What is the Power of Maintenance?

A

To advance just income for the benefit of the minor beneficiary before becoming absolutely entitled.

56
Q

What are the core reasons for using the Power of Maintenance?

A

For the education, welfare, support, and benefit of the minor beneficiary.

57
Q

At what age does a beneficiary gain entitlement to income?

A

At age 18, as a matter of statute.

58
Q

What is the distinction between ‘Intermediary Income’ in testamentary trusts?

A

There is no automatic right to intermediary income unless specific conditions are met.

59
Q

What is the duty of trustees regarding income and capital in fixed trusts?

A

Trustees must distribute income and capital as it arises, as soon as possible.

60
Q

What are the investment powers of a trustee under S.4?

A

General suitability and specific suitability.

61
Q

What is required for the delegation of powers by a trustee?

A

Delegation must be in writing and by a formal policy statement of instructions.

62
Q

What is the characterizing feature of fiduciary duty?

A

Loyalty; trustees have an obligation of single-minded loyalty to the principle.

63
Q

What is ‘election of remedies’?

A

The choice a beneficiary has to choose between various appropriate proprietary and personal claims available to them on trustee breach.

64
Q

What constitutes a breach of trustee duties?

A

Inappropriate distribution, wrongful distribution, poor investments, unauthorized investments, or profits.

65
Q

What is the ‘Common Law Duty of Care’?

A

The standard of care that requires a trustee to act as an ordinary prudent businessperson would in equity.

66
Q

What are personal remedies in equitable claims?

A

Remedies relying on a fault standard, such as equitable compensation and account of profits.

67
Q

What are proprietary remedies?

A

Recoverable irrespective of fault, requiring a proprietary right in the asset e.g tracing and an existing fiduciary relationship.

68
Q

What is ‘subrogation’?

A

Stepping into the shoes of another under the same terms to take equivalent ‘security’ as previously held.

69
Q

What is a ‘bona fide purchaser’ defense?

A

A defense for a purchaser for value who acts in good faith and without notice.

70
Q

What is the statutory defence under s.61 TA?

A

The defence that the trustee acted honestly and reasonably and ought fairly to be excused.

71
Q

How can trustees protect themselves during administration?

A

By applying for counsel’s opinion, seeking court directions, or obtaining beneficiary consent.

72
Q

What is the role of s.27 TA 1925?

A

To put unknown beneficiaries on notice through public advertisement.

73
Q

What happens to a beneficiary’s entitlement to income upon turning 18?

A

It triggers the end of maintenance or advancement and allows collection of accumulated income.

74
Q

What is the starting point for apportionment of trustee liability?

A

Joint and several liability.

75
Q

What is the largest remedy if the asset is rising in value?

A

Choose a proprietary interest e.g. equitable lien to get the benefit of the increase.

76
Q

What is the recommended remedy if the asset is falling in value?

A

Choose a personal remedy.

77
Q

What does BFP stand for in the context of bona fide purchasers?

A

BFP = consideration + good faith + without notice.

78
Q

What principle does ‘Equity’s darling’ refer to?

A

The defense for the bona fide purchaser.

79
Q

What is the preferred remedy for unmixed funds?

A

The proper remedy is following the asset in a simple and uncomplicated way.

80
Q

In the case of innocent mixtures, how must leftover money be shared?

A

Rateably in accordance with their proportionate share in the asset.

81
Q

What principle applies to wrongful mixtures regarding sharing leftover money?

A

Same principle applies regarding sharing the money left over by proportionate shares.

82
Q

What is the preferred action when dealing with both mixed funds?

A

Simply sue the trustee for the original misapplied amount.

83
Q

What does tracing refer to?

A

Identifying a new asset as the substitute for the old and recovering that.

84
Q

What is the principle established in Re Hallet?

A

The trustee is deemed to have paid his own first.

85
Q

What does the Re Oatway principle state?

A

The trustee spends his own money first when withdrawing money from a bank account.

86
Q

According to Roscoe, what happens when personal money is paid back into the trust fund?

A

It is not regarded as replacing that fund.

87
Q

What does the case Shallson v Russo allow beneficiaries to do?

A

Elect to keep for themselves the most profitable transactions irrespective of breach.

88
Q

What are innocent mixtures required to do according to Re Diplock?

A

Always be shared proportionately with other mistreated beneficiaries.

89
Q

What is the first in, first out rule established in Re Clayton?

A

The sum of money first paid in is first to be drawn out.

90
Q

What does the ruling in Barlow Clowes | Charity Comm v Framjee state about Re Clayton?

A

The rule can be disapplied if there is contrary intention, impracticable result, or unfairness.

91
Q

What are the alternatives to the Re Clayton principle?

A
  • Parri Passu: A static, single calculation at the end
  • Rolling Charge: A dynamic recalculation of contributions.
92
Q

What type of claims are TP liability claims classified as?

A

Fault-based claims resulting in personal liability.

93
Q

What are common options to remedy TP liability?

A
  • Compensation for loss
  • Traceable assets
  • Proprietary claim over the assets
94
Q

What are the elements of Dishonest Assistance (DA)?

A
  • Trust in existence at the material time
  • Assistance of the breach
  • Dishonesty (objective standard)
  • Factual causation
95
Q

What is a key difference between TP liability and ordinary equity claims?

A

TP claims are actionable irrespective of whether a benefit was received.

96
Q

What are the elements of Knowing Receipt (KR)?

A
  • Misapplication of trust property
  • Existing proprietary interest in the trust property
  • Beneficial receipt
  • Knowledge (before or after the receipt)
97
Q

What is the test for knowledge in a KR claim?

A

Unconscionability - objective; no dishonesty needed.

98
Q

What is the implication of a lack of knowledge for KR liability?

A

No liability for KR.

My Revision SQE FLK (5 decks)

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