M IV

Question 1

A landowner is selling land the title to which is unregistered.

What is the document that the landowner’s title must begin with?

A conveyance on sale.
A root of title.
An epitome of title.

Answer 1

(B) The traditional method of proving ownership of unregistered land is by the production of documents. When land is unregistered, the seller’s title must begin with a document called the ‘root of title’. (A) is incorrect because a conveyance on sale documents the transfer of ownership from seller to buyer for valuable consideration. It may be a document encountered in an unregistered title but does not necessarily have to be the root of title where the seller’s title begins. (C) is incorrect because an epitome of title is the chronological list of unregistered documents of title with copies annexed, not the first document that must be provided.

Question 2

A driver accidentally strikes a pedestrian on a pedestrian crossing. The pedestrian makes a claim against the driver, and evidence suggests that the driver’s vehicle was travelling at a high rate of speed.
The driver defends the claim on the basis that the pedestrian ran out onto the crossing and into the path of the driver’s approaching vehicle. The driver also is a senior government official who was responding to an emergency call out of national importance.

The defence are refusing to provide any documents which might explain why the vehicle was travelling at a high speed or the nature of the call out, claiming public interest immunity.

Is the driver’s position tenable insofar as disclosure is concerned?

No, the driver’s duty is to disclose any documents that are potentially adverse to their case or the claimant’s case.

Yes, the driver can refuse to disclose documents if it is accepted that production of the documents would harm the public interest sufficiently to justify withholding them.

No, public interest immunity is restricted to claims against the Crown.

No, as it is relevant to the claim where the official’s car was going and why they were travelling at that rate of speed.

Answer 2

(B) It is possible that the argument of public interest immunity will prevail. A party may withhold disclosure of a document on grounds of public interest immunity if disclosure may harm the nation or the administration of justice. Ultimately, to prevail, the driver will have to provide information to the court which will balance the risk to public interest against the value that disclosure may have to the other party. (A) is incorrect because, whilst true in normal circumstances, it fails to take account of public interest immunity. (C) is incorrect because immunity extends to any situation where documents contain sensitive political or state information.

Question 3

A defendant gives disclosure in a claim arising from a contractual dispute. The claimant notices that the disclosure list fails to include any email communications between the defendant and a supplier who is not part of the claim, but which were referred to in the defendant’s Statement of Case.
Which of the following statements most accurately describes the steps the claimant should take to obtain disclosure of the emails?

The claimant should write to the court, explaining the defect in the disclosure, and ask the court to refer the matter to the District Judge for consideration of appropriate action.

The claimant should make an application to the court for an order striking out the defendant’s defence for failure to file an adequate disclosure list.

The claimant should first seek disclosure from the supplier.

The claimant should make an immediate application for specific disclosure of emails passing between the defendant and the supplier during a stated period prior to the alleged breach.

The claimant should write to the defendant, asking for disclosure of the emails, and if this fails make an application for specific disclosure.

Answer 3

(E) A party who is unhappy with disclosure because they have reason to believe relevant documents exist which were not disclosed may make an application for specific disclosure. However, before making the application, the party should write to the other party, asking for the documents and explaining, among other things, why they believe the party has the documents and why it is reasonable and proportionate for the documents to be disclosed. Here, the claimant has good reason to believe the emails exist, as the defendant referred to them in his Statement of Case. (A) is incorrect because this will have no effect. A formal application should be made if the written request for documents fails. (B) is incorrect because it is too early to seek an order striking out the defence. Usually, a court will not strike out a defence or claim for failure to disclose unless a party failed to comply with a specific disclosure order indicating that the defence or claim will be stricken unless the order is complied with (an ‘unless order’). (C) is incorrect. Although disclosure may be had from non-parties under certain circumstances, the claimant should first seek disclosure from the defendant. (D) is incorrect because the court would likely consider the application premature because of the failure to make a written request.

Question 4

A supplier allegedly breached a contract with a car manufacturer. The car manufacturer contends that parts sent to it from the supplier were not up to specifications. While reviewing documents for possible disclosure, the car manufacturer’s solicitor discovered a memo written by the car manufacturer’s former solicitor discussing the merits of possible litigation.

Which privilege would the memo fall under?

Legal advice privilege.
Litigation privilege.
Without prejudice privilege.

Answer 4

(A) Legal advice privilege relates to communications with a client. It protects compulsory disclosure of all types of communication between a client and their lawyer in which advice is given (or requested) within a relevant legal context. This privilege protects only the solicitor-client relationship and not documents provided by other professionals, for example, documents provided by accountants. The document must be ‘directly related’ to the performance by the solicitor of their professional duties as a legal advisor. Here, the memo from the former solicitor discusses the merits of the litigation, so it squarely falls under the litigation privilege. (B) is incorrect. Litigation privilege relates to communications with third parties (for example, experts and barristers) for purposes of preparation for trial. Here, the communication was to the client directly, so litigation privilege is not the correct answer. (C) is incorrect. Without prejudice privilege arises from settlement negotiations. To aid in settlement negotiations, documents created for settlement purposes are privileged. The memo here is not related to settlement negotiations and so this privilege does not apply

Question 5

A merchant brings a claim for professional negligence against a firm of solicitors which represented the merchant in a breach of contract claim. The claim alleges that the firm did not contact two important witnesses despite the merchant providing the firm details regarding the witnesses. The court has made an order for standard disclosure.
Which of the following statements most accurately describes the parties’ obligations regarding documents that must be disclosed?

The parties need only disclose documents upon which they will rely or documents which adversely affect their case or another party’s case or which support another party’s case which are or were within their control.

The parties need only disclose documents upon which they will rely and documents that affect their case adversely or support the other party’s case that are or were in their possession.

The parties need only disclose documents and evidence which they plan to tender in support of their claim which are or were within their control.

The parties need only disclose documents and evidence which supports their case which are or were within their control.

The parties need only disclose documents and evidence which supports their case and which are or were within their possession.

Answer 5

(C) The duty of disclosure is wide ranging. The parties must disclose any documents upon which they will rely and documents which adversely affect their case or another party’s case or which support another party’s case which are or were within their control. (A) is incorrect because the duty to disclose is not limited to documents that are or were in a party’s possession; a party must disclose documents within their control, which includes documents a party has or had a right to possess, inspect, or copy, in addition to documents that are or were in the party’s possession. (B) and (D) are incorrect because the duty also extends to documents which affect the party’s case adversely or support or adversely affect the other party’s case.

Question 6

A homeowner sues a self-employed builder and obtains a judgment in the County Court for £10,000. The builder does not pay. The homeowner tells his solicitor that he has an address for the builder, and they think that the builder may be owed money by one or more building clients.

Which of the following is the most appropriate advice for the solicitor to give for the next step for enforcement?

The homeowner should make an application for a charging order of the property corresponding to the address.

The homeowner should make an application for an attachment of earnings order.

The homeowner should make an application for a third-party debt order.

The homeowner should make an application for a warrant of control against the property to be found at the property corresponding to the address.

The homeowner should make an application for oral examination

Answer 6

(E) If a judgment debtor does not pay on a judgment, the judgment creditor may apply for an order requiring the judgment debtor to attend court for oral examination to provide information about the debtor’s means and assets. This information will allow the homeowner to assess what is the most viable method of enforcing judgment. (A) is incorrect, as it is not possible to apply for a charging order without first knowing whether the builder is the registered proprietor or simply a tenant at the address the homeowner found. (B) is incorrect, as attachment of earnings is appropriate only for employed, not self-employed, people. A way to remember this is that the order is directed to the defendant’s employer. (C) is incorrect as more specific information is required about the nature and amount of the debts and the debtors to be able to obtain a third-party debt order (for example, the identity and addresses of the third parties). (D) is possible, but is not advisable, without knowing more about what goods the builder may have at the address and their likely value.

Question 7

A solicitor is representing a client in a £750,000 contract claim against a manufacturer. The manufacturer was hired to build a machine that tests the pulling power of train engines. The client claims the machine that was delivered failed to meet the specifications the client provided in a number of ways. Because the engineering aspects of the machine are complex, and the case involves a significant amount of money, the court has allowed each party to hire their own expert on the matter. The claimant hires an expert and receives the expert’s report.

Which of the following is true regarding the report received by the claimant?

The expert’s report must be disclosed to the defendant if the claimant intends to rely on it, but it is not privileged in any event as hiring the expert was authorised by the court.

The expert’s report must be disclosed to the defendant if the claimant intends to rely on it and it will lose its privilege.

The expert’s report must be disclosed to the defendant if the claimant intends to rely on it, but its contents remain privileged.

Answer 7

(E) The expert’s report must be disclosed to the defendant if the claimant intends to rely on it and it will lose its privilege. When a court authorises the parties to hire their own experts, the expert’s report does not have to be disclosed unless the party intends to rely on it.

Question 8

In a professional negligence claim between a company and its former solicitors, the claimant company serves the defendant with a hearsay notice in respect of evidence to be given by one of the company directors because the director is unable to attend the trial. The claimant is not proposing to have the witness in court on the day of the hearing but wants the court to have some regard to the evidence that they may give. The defendant doubts the truthfulness of the hearsay evidence and knows where the hearsay witness lives.

What should the defendant do with regard to the hearsay evidence?

Make an application asking the court to disallow the witness statement from the bundle of documents for trial, on the basis that the defendant will be prejudiced if the witness is not in attendance for cross-examination.

Serve a witness statement themselves, attacking the credibility of the witness.

Make an application within 14 days of service of the notice to call the witness to court for the trial, together with a notice to attack credibility.

Answer 8

(E) The appropriate course of action is to make an application accompanied with a notice to attack credibility. They can only do this if they know where the witness lives. (A) is incorrect because this is not the correct process. An application on this basis is likely to fail. The court will expect the defendant to proceed as per (E). (B) is incorrect because, whilst there is no property in a witness, it is unlikely that the witness will acquiesce to the request for a statement and is unlikely to be co-operative in the process. (C) is incorrect because a witness statement of this nature will have little effect. They need to be able to cross-examine the witness in the witness box. (D) is incorrect because they will only be able to attack the credibility of the witness if they serve a notice to attack credibility

Question 9

A man slipped on a puddle in front of a freezer in a supermarket. He fell and broke his arm. The supermarket has admitted liability, but the parties have been unable to agree damages. The man instructs solicitors, and they issue proceedings on 3 July. On behalf of the client, the solicitors send a Part 36 offer in the correct form to the defendant by first class post on Monday 5 July. The offer specifies the shortest relevant period for acceptance allowed. On 30 July, the defendant supermarket decides that it wishes to accept the offer. No other relevant communication was made.

May the defendant accept the offer at this time?

No, because the relevant period has expired, and the defendant has not made an application to the court to accept after expiry of the relevant period.

Yes, because the claimant has not withdrawn the offer.

No, because the relevant period has expired, and no exception is available because the claimant chose the shortest allowable relevant period.

Yes, because it is still within the relevant period.

No, because the offer was made too soon after issue of proceedings and so was invalid.

Answer 9

(B) The minimum relevant period for a Part 36 offer (that is, the minimum time that it must be kept open) is 21 days. Since the offer was made on 5 July and it will be deemed delivered two days later, the offer expired on 28 July. However, a Part 36 offer can be accepted at any time, even after expiry of the relevant period, so long as the offeror has not withdrawn it. The question indicates that the only facts relevant to the offer are set out in the question, and the question does not indicate that a withdrawal of the offer was made. Therefore, the defendant may accept the offer on 30 July. (A) is incorrect because, as just explained, the offer may be accepted even though the relevant period has expired because the claimant did not withdraw the offer. Permission from the court is not required.

Question 10

A claimant initiated a simple breach of contract case against a defendant, which was allocated to the fast track. Settlement efforts were unsuccessful, and all necessary pre-trial steps have taken place.
When must the trial bundles be filed?

No less than 30 days before trial.
No less than 28 days before trial.
No less than 14 days before trial.
No less than 7 days before trial.
No less than 3 days before trial.

Answer 10

(E) The claimant must prepare a minimum of six trial bundles and they must be filed between three and seven days before the trial is to take place. Thus, they cannot be filed less than three days before trial. It follows that the other answer choices are incorrect.

Question 11

After attempts at alternative dispute resolution fail, a woman issues a claim for battery arising from a fight at a pub. The case is allocated to the fast track. It then proceeds through disclosure and a pre-trial review hearing is set. The court orders the parties to prepare a pre-trial review case summary specifying the agreed and disputed facts and providing a synopsis of the evidence the parties believe will be required.

What is the maximum length for the pre-trial review case summary?

500 words.
750 words.
1,000 words.

Answer 11

(B) The pre-trial review case summary should not exceed 500 words

Question 12

The court grants a defendant’s application for leave to appeal the decision of a District Judge on a summary judgment application. The defendant is looking for the application to be re-heard and has new evidence that it proposes to place before the judge.

Which one of the following best describes how the Court will hear the appeal?

The judge will re-hear the case and make a decision afresh, and the defendant may introduce the new evidence if permission is granted.

The judge will re-hear the case and make a decision afresh, but the judge will not consider any new evidence.

The judge will consider the question of the new evidence as a preliminary matter and will fix a date to proceed with the appeal once decided whether to introduce the new evidence.

The hearing is limited to review of the decision of the lower court based upon the evidence available at the original hearing.

The hearing is limited to review of the decision of the lower court, and the court will not permit the defendant to rely upon new evidence that was not available at the original hearing without permission.

Answer 12

E) The appeal will not be a re-hearing. There is a chance that the judge will permit the new evidence, but it will be difficult to introduce, and the court must grant permission. (A) is incorrect because the judge will not re-hear the case.

Question 13

A cyclist was injured when she was hit by a car. She subsequently brought a claim for her injuries in the County Court. The claim was heard before a District Judge. The cyclist won, and the car driver would like to appeal on the ground that the District Judge wrongly exercised discretion in allowing certain evidence.

Which of the following have the power to grant permission for the appeal?

The District Judge who heard the case and a Circuit Judge of the County Court.

The District Judge who heard the case and a High Court Judge

Answer 13

A cyclist was injured when she was hit by a car. She subsequently brought a claim for her injuries in the County Court. The claim was heard before a District Judge. The cyclist won, and the car driver would like to appeal on the ground that the District Judge wrongly exercised discretion in allowing certain evidence.
Which of the following have the power to grant permission for the appeal?

The District Judge who heard the case and a Circuit Judge of the County Court.
The District Judge who heard the case and a High Court Judge

Question 14

A ship owner and a businessman enter into a contract to transport a cargo of motorbikes from London to Mumbai. As the voyage commences, the ship owner becomes aware that the Suez Canal, which links the Mediterranean Sea and the Indian Ocean, is shut because of damage sustained as a result of an exceptional storm. To get the motorbikes to their destination, the ship owner would have to transport them round the continent of Africa. The ship owner tells the businessman that the closure means he is no longer under an obligation to perform his duties under the contract. The contract contains a force majeure clause, which specifically provides for such a closure.

Is the ship owner correct?

Yes, because the force majeure clause is likely to operate to terminate the contract.

No, because it is not enough for a contract to be difficult or expensive to perform for frustration to occur; performance of the contract must be impossible or illegal.

No, because the Law Reform (Frustrated Contracts) Act 1943 would apply in these circumstances and would compel performance of the ship owner’s obligations.

Answer 14

(B) This contract contains a force majeure clause. A force majeure clause allows for the termination of a contract on the occurrence of an event outside the control of the parties, which in the scenario includes a closure of the Suez Canal. (A) is incorrect because a contract will not be frustrated just because it is too difficult or is more expensive to perform. For frustration to occur, performance must be impossible, illegal, or radically different from what was agreed. (C) is incorrect because, whilst a contract cannot be frustrated just because it is more difficult or expensive to perform, the force majeure clause expressly agreed between the parties would operate to provide for this scenario.

Question 15

A man approaches a welder and asks the welder if he would be willing to build the man a still to produce alcoholic spirits. Although it is illegal to brew alcoholic spirits without a license, the welder agrees to do the work for £400 since it is not illegal to build a still. The man tells the welder that he will pay the welder out of the proceeds from selling the spirits (better known as ‘moonshine’).

The welder builds the still and it works perfectly. The man produces three batches of moonshine and sells them for a total of £500 but refuses to pay the welder. The welder then brings a claim against the man for breach of contract.

Is the welder likely to succeed in his claim?

Yes, because while the sale of moonshine is illegal, building a still is not.

No, because the contract was void for illegality of performance.

Yes, because the welder did nothing that was illegal.

Answer 15

(C) The welder cannot recover from the man because the contract is void because it was concluded for an illegal purpose. The welder knew that the man wanted to build the still for an illegal purpose. A contract entered for an illegal purpose is void (and not merely voidable

Question 16

A woman seeking life insurance sends a proposal form to an insurance company. The insurance company sends her a quote. The woman is seriously injured in a car accident. She then accepts the insurance company’s quote.
Is there a binding life insurance contract?

No, because the woman has left it too late to accept the quote.

No, because the offer contained in the quote has lapsed by operation of law.

Answer 16

(D) The offer contained in the insurance company’s quote will be subject to an implied condition that the woman’s state of health is unchanged. This condition has now failed, and so the offer has lapsed by operation of law.

Question 17

A director of a company in financial difficulties asks a junior employee to mortgage her flat to the company’s bank as security for the company’s debts to the bank. The company goes into liquidation.
What is the status of the mortgage granted by the employee to the bank?

It is voidable unless the bank took steps to ensure that the employee made the decision of her own free will, because of presumed undue influence by the director (as employer).

It is void unless the bank took steps to ensure that the employee made the decision of her own free will, because of presumed undue influence by the director (as employer).

Answer 17

(A) This is a case of presumed third party undue influence. A presumption of undue influence arises because of the relationship of trust and confidence between the director (as employer) and the employee. It should be clear to the bank that the mortgage is intended as security for the company’s debts, so it is said to be ‘put on enquiry’ by the relationship between the director and the employee and to have constructive notice of the director’s undue influence. The mortgage will therefore be voidable unless the bank took steps to ensure that the employee made the decision of her own free will.

Question 18

A solicitor is approached by a potential client with a personal injury claim. The client does not have any insurance to cover her legal fees and enquires whether the solicitor will accept the case on a contingency fee basis. The solicitor thinks that this will be a costly case to bring but one which is of potentially high value. He therefore proposes a damages based agreement with a success fee of 30% of the damages awarded.

Is the solicitor permitted to enter into a damages based agreement on the basis described?

No, because damages based agreements cannot be for more than 25% of the damages awarded in personal injury cases.

Yes, because damages based agreements can be for up to 50% of the damages in personal injury cases.

Answer 18

(B) The solicitor is not permitted to enter into a damages based agreement for more than 25% of the damages awarded in a personal injury case. In a personal injury case, the legal costs payable under a damages based agreement cannot be more than 25% of the sum recoverable, excluding future losses. In non-personal injury cases, the sum payable can be no more than 50%. Here, the solicitor has proposed a success fee of 30% of the damages awarded in a personal injury case, which is not permitted. (E) is incorrect because in a personal injury case, the legal costs payable under a damages based agreement cannot be more than 25% of the sum recoverable, excluding future losses. The 50% figure relates to non-personal injury cases.

Question 19

An employee of a firm of solicitors discovers that he is being paid less than employees of a similar level of qualification and experience. When he asks his line manager about this difference, he is told that his peers are all married and so have additional financial pressures on them which he, as a single man, does not have.

Under the Equality Act 2010, would the employee have a potential claim for discrimination against his firm?

No, because marriage is not a protected characteristic.

Yes, because the firm is directly discriminating against him on the grounds of marriage.

Answer 19

C) The employee has a potential claim against the firm for direct discrimination on the grounds of the protected characteristic of marriage because the firm is expressly treating single employees less favourably than married employees. Direct discrimination is treating one person less favourably than another because of that person having a protected characteristic. Note that there is no justification for direct discrimination on the grounds of marriage/civil partnership. (A) is incorrect because, as explained above, this is direct discrimination, not indirect discrimination.

Question 20

A solicitor is working on a divorce case with a client. Whilst discussing assets, the client informs the solicitor that he has bought several properties using cash, so they will be hard for his wife to find. The solicitor suspects the purchases are part of a money laundering scheme.

Report the suspicions to the firm’s Money Laundering Reporting Officer (‘MLRO’).
Stop representing the client.
Wait until the divorce case is over and then report the suspicions to the MLRO.
Maintain client confidentiality and not report the matter.

Answer 20

Maintain client confidentiality and not report the matter.

Question 21

A company was incorporated several years ago with the Companies (Model Articles) Regulations 2008 (unamended) as its articles of association. It now wishes to amend its articles to include provisions for preference shares so it can issue preference shares to raise capital.

What must be filed at Companies House following the change of articles?

The new articles and the shareholders’ special resolution to change the articles only

The new articles and the shareholders’ ordinary resolution to change the articles only.

Answer 21

B) The shareholders change the articles by special resolution and all special resolutions must be filed at Companies House. There is no fee for a change of articles and no specific form which must be filed. (A) and (C) are incorrect as the board do not resolve to change the articles (and, as to (A), there is no such thing as a special board resolution). (D) is incorrect as a change to the articles requires a special resolution of the shareholders and not an ordinary resolution. (E) is incorrect as all special resolutions must be filed, and to change the articles requires a special resolution of the shareholders.

Question 22

A company was incorporated 10 years ago. The company has adopted the Companies (Model Articles) Regulations 2008 for private companies limited by shares (unamended) as its articles of association. It has an issued share capital of 100 ordinary £1 shares. The company has grown in size and value and needs new office space. It has found an investor willing to provide the needed space in exchange for the issue of 50 ordinary shares.

Which of the following statements correctly describes the procedure for allotment of the new shares?

The board can issue more shares without involving the shareholders.

The shareholders will have to pass a special resolution to give the board authority to allot the shares.

The shareholders will have to waive their pre-emption rights before the board can allot the shares.

The shareholders will have to pass an ordinary resolution to give the board authority to allot the shares.

Answer 22

(A) The board have authority to allot the shares as the company was incorporated after 2009, the shares are the same class as the shares that have been issued, and there are no restrictions in the articles (we know this because unamended Model Articles include no restrictions). Therefore, (E) is incorrect. (B) and (D) are incorrect because no shareholder resolution is required under these circumstances. (C) is incorrect because there would be no pre-emption right under the circumstances. When a company allots shares after the initial allotment, existing shareholders have a right to purchase a portion of the shares to maintain their proportional ownership if the shares are to be issued for cash. This is the statutory pre-emption right. As the shares here are not to be issued for cash, the statutory preemption rights do not apply.

Question 23

A sole trader was made bankrupt last month. The trustee in bankruptcy has identified the following creditors:

• HMRC is owed the last quarter of VAT returns amounting to £20,000.
• The sole trader’s spouse lent the sole trader £10,000 three months ago.
• The ordinary unsecured creditors are owed £10,000.
• The trustee in bankruptcy expects his costs to amount to £3,000.

In which order will any available funds be distributed to the creditors?

MRC, the trustee in bankruptcy, the ordinary creditors, the spouse

The trustee in bankruptcy, HMRC, the ordinary creditors, the spouse

Answer 23

(E) Available funds will be distributed in the following order: (1) costs of the bankruptcy; (2) preferential debts (holiday pay due to employees, wages of employees due in the last four months, and HMRC in respect of VAT, PAYE, and National Insurance contributions owed); (3) ordinary unsecured creditors; and finally, (4) postponed creditors (spouse or civil partner)

Question 24

A company has appointed a new financial controller with instructions to save costs and increase efficiency. One suggestion the controller has made is to delay paying suppliers until the company’s customers have paid the company to improve cash flow. The directors are concerned that this will enable the creditors to issue a winding up petition against the company.

Which of the following creditors would be able to apply for the company to be wound up?

A creditor who is owed £10,000 and whose invoice has been outstanding for 21 days.

A creditor who is owed £1,000 and served a statutory demand on the company 14 days ago.

A creditor who is owed £500 and who obtained a judgment against the company yesterday.

A creditor who has issued proceedings against the company for £1,500 in respect of an overdue debt.

A creditor who is still owed £500 in respect of an unpaid judgment despite bailiff’s attending the company’s premises.

Answer 24

(E) A creditor must be able to prove the company is insolvent to be able to issue a winding up petition. A creditor can prove insolvency by either: serving a statutory demand which is not paid within 21 days in respect of a debt of £750 or more, or by obtaining a judgment and attempting to execute the judgment but the debt is not fully satisfied. Here, the creditor obtained a judgment, but the bailiff nonetheless was unable to obtain full payment from the debtor. (A) is incorrect, as although the creditor is owed more than £750, the facts indicate only that the invoice was outstanding for 21 days and do not mention a statutory demand. (B) is wrong, as although the creditor has served a statutory demand, it has not been outstanding for more than 21 days. (C) is incorrect, as although a judgment has been obtained, the creditor has not yet failed to execute the judgment. (D) is incorrect as the creditor has not yet obtained a judgment for the debt.

Question 25

A sole trader has been trading successfully as a tyre and exhaust fitter for several years. A few months ago, a national tyre chain opened a branch close to the trader’s business premises. As a result, the trader has lost business and now is unable to pay debts as they become due.

Who of the following could apply to make the trader bankrupt?

The trader’s spouse, who is worried about the extent of the trader’s trade debts.

A tyre supplier who is owed £2,000.

A tyre supplier who is owed £3,000.

An exhaust manufacturer who is owed £5,000.

The trader’s bank, who is owed £6,000 on a loan secured by a fixed charge over the business premises.

Answer 25

(D) One or more unsecured creditors who is/are owed at least £5,000 combined can present a petition for an order of bankruptcy to the bankruptcy court. (A) is incorrect as a debtor can apply online to declare themself bankrupt, but their spouse cannot. (B) and (C) are incorrect as the unsecured creditors here are not owed enough. (E) is incorrect as a secured creditor cannot apply for a bankruptcy order

Question 26

A company purchased property three years ago using a loan from its bank. The company granted the bank a fixed charge over the property. The charge was not registered at Companies House. Six months ago, the company granted a floating charge over all of the assets of the company. The grant was to a trade supplier as security for any money owing in respect of goods purchased on credit by the company. The floating charge was registered at Companies House.

Which of the following statements best describes who would receive the proceeds of sale if the company becomes insolvent and the property is sold?

The bank, as it has a fixed charge over the premises.

The trade supplier, as the bank’s failure to register

the charge makes it void against the company.
The bank, as the trade supplier’s floating charge was created within the last six months.

The trade supplier, as the bank’s failure to register

the charge makes it void against the trade supplier.
The bank, as fixed charges rank ahead of floating charges.

Answer 26

(D) The trade supplier would receive the proceeds of the sale first. A charge which has not been validly registered at Companies House is void against other creditors.

Question 27

A company went into liquidation on the 1st of this month. The liquidator is considering the following antecedent transactions to consider whether they could be challenged to swell the funds available to pay the creditors.

• Three years ago, one of the directors lent money to the company. Six months later the loan was secured by the grant of a charge over one of the company’s warehouses.
• Eighteen months ago, the company repaid a loan to the bank which had been personally guaranteed by one of the directors.
• Four months ago, the company paid a trade debt ahead of the invoice due date.

Which of these actions occurred within the relevant time for a preference?

The payment of the trade debt only.

The repayment of the loan only.

The repayment of the loan and the payment of the trade debt.

The grant of the charge and the repayment of the loan.

Answer 27

(D) The repayment of the loan and the payment of the trade debt are within the relevant time for a preference. The relevant time for a preference is within six months of the onset of insolvency or two years if the preference was made to a connected person.

Question 28

A company which manufacturers women’s clothes holds a board meeting after discovering its main customer is about to enter liquidation. The board made several decisions at the board meeting. One member of the board is concerned that each of the decisions could potentially result in a preference.
Which of the following is least likely to be a preference?

Granting a charge to a director to secure a loan made to the company.

Paying creditors who are sole traders ahead of company creditors.

Allowing a fabric supplier to modify their contract to include a retention of title clause which did not exist when the contract was entered.

Entering into a new contract with a supplier who is offering cheaper zips and buttons than the company’s current supplier.

Allowing a creditor to enter judgment against the company when the company has a good defence to the claim.

Answer 28

(D) The decision to enter into a new contract is least likely to be set aside as a preference. A preference arises when a debtor does something to put one creditor ahead of others in insolvent liquidation or administration with intent to do so. Making a new contract with a new supplier to save money on supplies would not be a preference. (A) is incorrect as this could be a preference, because the charge would make the director a secured creditor, and a secured creditor is in a better position on insolvency than an unsecured creditor. (B) is wrong as this could be a preference, because one group of creditors are being paid ahead of other creditors. (C) is incorrect as a creditor with a retention of title clause is in a better position on insolvency because it can take back its goods. (E) is wrong as a judgment creditor is in a better position than an ordinary unsecured creditor as it has more remedies available

Question 29

A company went into creditors’ voluntary liquidation last year. The liquidator is now finalising the amount available for unsecured creditors. The liquidator has realised £200,000 and has incurred costs of £30,000. The preferential creditors are owed £44,000 and the unsecured creditors are owed £600,000.

How much will an unsecured creditor who is owed £60,000 receive?

£60,000
£20,000
£17,000
£15,600
£12,600

Answer 29

(E) The unsecured creditor will receive £12,600. Unsecured creditors receive a proportion of the proceeds realised by the liquidator after the liquidator subtracts the expenses of winding up and pays the preferential debts. Here, the liquidator realised £200,000. After subtracting expenses (£30,000) and paying the preferential creditors the £44,000 owed to them, £126,000 remains to pay the unsecured creditors proportionally. The unsecured creditor here holds 10% of the total unsecured debt (that is, £60,000 of the £600,000 unsecured debt) and so is entitled to 10% of the £126,000 that remains to pay the unsecured creditors. Thus, (A), (B), (C), and (D) (which appear to be based on not subtracting out the proper amount for expenses and the preferential debts) are incorrect.

Question 30

A bank lent money to a company which is now in liquidation. The loan was secured by a correctly registered fixed charge over the company’s warehouse premises. The company owes £750,000 on the loan, and the premises are sold for £650,000. The liquidator has £160,000 in other funds remaining after paying the costs of liquidation and the preferential creditors. The total unsecured debt is £1 million.

How much will the bank receive?
£590,000
£750,000
£666,000
£650,000
£16,000

Answer 30

C) The bank will receive £666,000. The bank has a fixed charge over the premises, which means the bank is entitled to the proceeds of the sale up to the amount of the debt still owed. Since the proceeds of the sale (£650,000) are less than the amount still owed (£750,000), the bank will receive the entire proceeds from the sale of the warehouse. The bank is an ordinary, unsecured creditor with respect to the £100,000 debt still remaining. Each unsecured creditor will receive a share of the other liquidation funds in the proportion that the debt owed to them bears to the whole unsecured debt. The bank’s unsecured debt is one-tenth of the whole unsecured debt (£100,000 : £1 million). Thus, in addition to the £650,000 from the sale of the warehouse, the bank will receive £16,000 (one-tenth of the £160,000 available to pay the unsecured creditors). (A) is incorrect. This appears to be the difference between the amount owed (£750,000) and the amount the liquidator obtained (£160,000), and there is no basis for awarding that amount.

Question 31

A company is proposing to change its name. The company has adopted the Companies (Model Articles) Regulations 2008 (unamended) as its articles of association.

When will the change of name become effective?

When the members resolve to change the name by special resolution.

When Companies House issue a new certificate of incorporation.

When Companies House receive notification of the name change.

Answer 31

(E) A company changes its name by special resolution of the members and is effective when a new certificate is issued. So the full procedure is that the board resolve to put the name change to a vote of the members and the members must approve by special resolution. The special resolution is then filed using the aptly named ‘Change Your Company Name by Resolution’ form, and then Companies House will issue a new certificate of incorporation. It follows that the other choices are too early in the process.

Question 32

An entrepreneur wants to set up a limited company. She knows her company will require articles of association, but is unclear about what they are and how they work.

Which of the following in relation to articles of association is incorrect?

The articles of association can be changed by special resolution.
The articles of association represent a contract between the company, the shareholders, and the directors.
The articles of association are not required to be submitted with the company’s registration documentation.
The articles of association are a public document that can be viewed on the Companies House website.

Answer 32

The articles of association represent a contract between the company, the shareholders, and the directors.

Question 33

A sole trader was made bankrupt last month. They entered the following transactions before the bankruptcy. The trustee in bankruptcy is considering whether any of these transactions could be voided as a transaction at an undervalue.
• Four years ago, the sole trader transferred their business premises to their spouse at 60% of market value.
• Three years ago, the sole trader sold plant and machinery to an unconnected third party at 55% of market value.
• Twelve months ago, the sole trader sold delivery vehicles to an unconnected third party at 75% of market value.

For which of the transactions would the trustee in bankruptcy have to show the sole trader was insolvent at the time of the transaction?

The transfer of the premises to the spouse.
The transfer of the plant and machinery.
The transfer of the delivery vehicles.
For all of the transfers.

Answer 33

(B) For an individual, there is no requirement to prove the debtor was insolvent at the time the transaction was made if it was made within two years before the bankruptcy and insolvency is presumed if the transaction is to a close relative. Thus, the trustee would not have to prove insolvency regarding the transfer to the sole trader’s spouse or with regard to the sale of the delivery vehicles (because that sale was within two years of the petition). But the transfer of the plant and machinery took place more than two years ago and was not to a close relative, so there, insolvency would have to be proved. Therefore, the other choices are incorrect

Question 34

The veil of incorporation means that shareholders (and directors) have no personal liability for the debts of the company, except in certain situations.

In which of the following situations is a court least likely to look beyond the corporate identity of a company to its shareholders?

A public limited company trades without a qualified company secretary.

The shareholders engage in fraudulent trading.

A disqualified director participates in the management of a company.

A public limited company trades without a trading certificate.

Answer 34

(A) A public limited company is required to have a qualified company secretary (a limited company does not have the same obligation). However, failure to do so would result in the Secretary of State giving the company a direction to make the necessary appointment. If the company fails to do so within the required timeframe, the officers of the company would be guilty of a criminal offence which may result in a fine, but they would not be subject to personal liability due to the veil of incorporation being lifted. The other options are all examples of situations where the courts might lift the veil of incorporation.

Question 35

Fourteen months ago, a travel company was having financial difficulty and transferred one of its holiday rental properties to one of the company’s directors for £200,000. Two months ago, the director sold the property to a third party for £300,000. The company is once again facing financial difficulties and goes into liquidation. The director who purchased the rental property is concerned that the purchase can be voided under the insolvency claw back provisions.
Which of the following states the legal position?

The transaction can be voided as a transaction at an undervalue only if the liquidator can show that the company was insolvent at the time of the transfer or became insolvent as a result of the transaction.

The transaction can be voided as a transaction at an undervalue if the court determines that the price was significantly less than market value.

The transaction cannot be voided as a transaction at an undervalue because the director was not a creditor at the time of the purchase.

The transaction cannot be voided as a transaction at an undervalue because it occurred less than 24 months ago.

Answer 35

C) A transaction at an undervalue arises where a debtor transfers property as a gift or for significantly less consideration than the property’s market value within two years of the onset of a company’s (or five years of an individual’s) insolvency. The transaction must also occur when the company was insolvent or it must have become insolvent as a result of the transaction. However, insolvency is presumed if the transaction is with a connected person. Thus, because the transaction here was with a connected person (a director) and it occurred within two years before the onset of the company’s insolvency, the transaction can be set aside if the court finds that the transaction was for significantly less than market value. (A) is incorrect as the relevant time period is two years. (B) is incorrect as the transaction is with a connected person and so insolvency is presumed. (D) is incorrect because there is no requirement that the director be a creditor; that status is related to preferences. (E) is incorrect because it suggests the opposite of the rule: the transaction can be voided because it occurred within 24 months of the insolvency petition.

Question 36

The board of directors of a public limited company wish to call an annual general meeting of the shareholders to pass a number of resolutions.
What is the notice period they are required to give the shareholders?

21 days.
14 days.
28 days.

Answer 36

) The notice requirement for an annual general meeting of a public limited company is 21 days.

Question 37

A company was incorporated several years ago with the Companies (Model Articles) Regulations 2008 as its articles of association. The company has 10 shareholders holding equal shareholdings. The board have passed a resolution to register a transfer of shares from one shareholder to another.
Which of the following correctly describes the steps which must be taken after the board resolution?

A new share certificate must be issued and Companies House must be notified of the current shareholders within 14 days.

A new share certificate must be issued, the register of members must be updated, and the register of
persons with significant control must be updated.

A new share certificate must be issued and the register of members must be updated.

A new share certificate must be issued, the register of members must be updated, and Companies House must be notified of the current shareholders within 14 days.

A new share certificate must be issued and Companies House must be notified of the current shareholders within 14 days.

Answer 37

C) After the board has resolved to register a transfer of shares, the register of members must be updated and a new share certificate must be issued to the transferee. (A), (D), and (E) are incorrect as Companies House need not be notified within 14 days. Instead, this information is sent on the Annual Confirmation Statement. (B) is wrong as there is no change to the persons of significant control here–one shareholder has gone from 10% to 0% and one has gone from 10% to 20%, but no shareholder has more than 25% of the voting shares (the threshold for a person with significant control).

Question 38

A chef borrowed £100,000 from a bank to purchase premises for a restaurant. The bank took a fixed charge on the premises to secure the loan. Several years later, and with the bank’s consent, the chef borrowed £60,000 from a friend, secured by a second fixed charge on the premises. Six months ago, the restaurant was closed by the local council for breach of environmental health regulations. The chef has now defaulted on both loans. £60,000 is outstanding on the bank loan and £40,000 is outstanding on the loan from the friend. The sale of the premises realised £70,000 after paying expenses of the sale.

How should the proceeds be distributed?

The bank and the friend have the same priority and their debts will be repaid proportionally: £42,000 to the bank and £28,000 to the friend.

The bank’s £60,000 will be repaid first, and the friend will receive the remaining £10,000

Answer 38

(D) The bank will be repaid in full and the friend will receive the remaining £10,000. If there is more than one charge on the property, the proceeds of sale will be used to pay the first charge and then the second charge. Thus, (B) is incorrect. (A) and (C) are incorrect because payment is in the order that the charges were granted and are neither proportional nor an even split. (E) is incorrect because only spouses or civil partners are postponed creditors.

Question 39

A small company manufactures and sells ties. The company has recently experienced a severe decrease in business. The sole director and shareholder of the company realises that soon the company will be unable to pay its debts. The director sells the company’s inventory of silk to the director’s brother-in-law at a twentieth of its market value. The director also gives his sister security over the company’s main manufacturing machine for a debt already owed to the sister. Three months later, the company goes into liquidation.
Which of the following statements reflects the legal position regarding the transfer to the debtor’s brother-in-law and the security granted to the debtor’s sister?

Only the transfer to the debtor’s brother-in-law is a preference. It may be voided by the court.

The security given to the debtor’s sister is a preference. It may be voided by the court.

Both the transfer to the debtor’s brother-in-law and the security given to the debtor’s sister are preferences. They both may be voided by the court.

Answer 39

(C) The security given to the sister is a preference and may be voided. A preference arises when a debtor does something that puts a creditor in a better position on liquidation or administration than they would have been had the event not occurred. Giving an unsecured creditor a security within six months of the onset of insolvency (or two years if the security is given to a connected person) when no new consideration was given for the security is a preference. A court may void a preference. Thus, (D) is incorrect. (A) and (E) are incorrect because the transfer to the debtor’s brother-in-law was not a preference. Nothing in the facts indicates the debtor’s brother-in-law was a creditor. Instead, the transfer to the debtor’s brother-in-law is a transfer at an undervalue-a transfer of property as a gift or for significantly less than market value within two years of a company’s insolvency. (B) correctly states that the transfer to the debtor’s brother-in-law is not a preference, but it is not true that the transfer may not be voided by the court-the court may void a transfer at an undervalue as well as a preference.

Question 40

A bank is approached by one of its borrowers, a company, to extend the company’s overdraft, currently standing at £100,000. The bank is concerned that the company might not repay the overdraft. It requests a floating charge to secure the overdraft. The company goes into liquidation three months after the floating charge is granted, when the overdraft had reached £180,000.

What advice would you give the bank in relation to the overdraft?

The bank will be an unsecured creditor for the full £180,000 regardless of whether the liquidator determines that the company was insolvent at the time of the charge.

The bank will be a secured creditor for £80,000 and an unsecured creditor for £100,000 if the liquidator determines that the company was insolvent at the time of the charge.

The bank will be a secured creditor for £80,000 and an unsecured creditor for £100,000 regardless of whether the company was insolvent at the time of the charge.

The bank will be a secured creditor for the full £180,000 regardless of whether the company was insolvent at the time of the charge.

The bank will not be able to enforce the floating charge because it is invalid as it is a preference.

Answer 40

(B) A floating charge granted within 12 months of insolvency is invalid if it was not given in exchange for fresh consideration and the company was insolvent at the time of the transaction or became insolvent as a result. Here the charge was granted three months ago. At that time, the company already owed £100,000. Since the bank did not give new consideration with respect to that amount, the floating charge can be set aside as to the existing £100,000 debt if the liquidator determines the company was insolvent at the time the charge was given. However, the bank gave additional consideration with respect to the additional £80,000 (specifically, £80,000 credit). Thus, the bank will have a valid floating charge with respect to the £80,000. (A) is incorrect as the charge is valid for fresh consideration and £80,000 of the overdraft was incurred after the charge was granted (making that fresh consideration). (C) is incorrect as the charge is void only if the company was insolvent at the time of the transaction or became insolvent as a result. (D) is incorrect as the charge is only valid for fresh consideration, and £100,000 was already owed when the charge was granted. (E) is incorrect as a charge is not a preference as here there was no desire to prefer the bank.

Question 41

A customer and an online retailer enter into a contract for the sale of a washing machine. The customer telephones the retailer, who offers the customer interest-free credit over the phone. The customer decides to purchase the washing machine on these terms.

Which of the statements below most accurately reflects the position in law?

The contract between the retailer and the customer can be concluded verbally as there is no requirement for a contract to be made in writing.

As this is a consumer contract, it is must be made in writing.

As this is a consumer credit agreement, it must be made in writing.

Answer 41

(C) Simple contracts can be made in any form: verbal, written, or through the conduct of the parties. However, certain contracts are required to be made in writing, and a consumer credit agreement is one such contract. (A) is incorrect because the contract between the retailer and the customer is concluded on interest-free credit terms, and as such represents a consumer credit agreement and therefore must be made in writing. (B) is incorrect because consumer contracts are not as such required to be in writing, for example, a contract for the purchase of goods in a shop can be concluded verbally or by conduct. The exception to this is consumer credit agreements, as mentioned above. (D) is incorrect because this is not a gratuitous promise. A gratuitous promise is a promise unsupported by consideration. It is true that gratuitous promises are binding only if made by deed. (E) is incorrect because, whilst contracts with online retailers are normally made electronically, these retailers also operate on the phone and such a contract could also be concluded verbally (provided no consumer credit is involved)

Question 42

A river breaks its banks and floods a farmer’s field. A neighbour offers to help pump away the water. The neighbour’s water pump is old and slow and takes a very long time to pump away the water. During that time, the crop in the field is ruined and the farmer is unable to sell it.

In a negligence action by the farmer against the neighbour to recover the value of the crop, which of the following is true?

The neighbour will be liable if a reasonable person would have taken steps to pump out the water more quickly.

The neighbour is not liable to the farmer because he voluntarily undertook to help rescue the crop.

The neighbour is not liable because the farmer is seeking to recover pure economic loss.

The neighbour will be liable if the farmer can show that, but for the delay caused by the slow pump, the crop would not have been damaged.

The neighbour is not liable because the damage to the crop was not reasonably foreseeable and so is too remote.

Answer 42

(B) The neighbour is not liable to the farmer. In general, there is no duty to undertake a rescue. Therefore, where a person does undertake a rescue, their duty is only to take reasonable care not to make the situation worse than it would have been had they not intervened. On the facts, there is nothing to suggest that the neighbour’s intervention made the situation worse (it did not, for example, prevent anyone else from undertaking a more effective rescue of the crop). (A) is not correct. It refers to the standard of reasonable care, but the neighbour was not under a duty to take care to save the crop (only a duty not to make the situation worse). (C) is not correct. The crop has suffered physical damage, so its value is not pure economic loss. (D) is not correct. It refers to the test for establishing causation of damage, but this is not relevant here because the neighbour was not under a duty to take care to save the crop. (E) is not correct. It refers to the test for remoteness of damage, but this is not relevant here because the neighbour was not under a duty to take care to save the crop.

Question 43

Under the Railway Fares Act 2011, the government has laid before the House of Commons and the House of Lords a draft of the Railway Fares Regulations 2020, which set the prices of train tickets. The regulations are subject to the affirmative resolution procedure.

What powers do Parliament have in respect of the regulations?

Both the House of Commons and House of Lords have 40 days during which they can vote to reject the regulations.

Both the House of Commons and the House of Lords can amend the regulations.

Only the House of Commons can amend the regulations.

Only the House of Lords can amend the regulations.

Both the House of Commons and House of Lords must vote in favour of the regulations for them to become law.

Answer 43

(E) Both the House of Commons and House of Lords must vote in favour of the regulations for them to become law. The regulations are a form of secondary legislation, in that they are made under powers granted by an Act of Parliament. The affirmative resolution procedure requires that both Houses vote in favour of the regulations for them to become law. (A) is incorrect because it describes the negative resolution procedure, which is the other procedure for enacting secondary legislation. (B), (C), and (D) are incorrect because they provide for amendment and neither House has the power to amend the regulations.

Question 44

A golfer and her instructor were playing golf when the golfer became very annoyed with the instructor. To show the other golfers in their group how annoyed she was, the golfer stood a few yards behind the instructor whilst the instructor was teeing off and swung a club at him. The instructor, who was focusing on his shot, was not within range of the club but unfortunately the club slipped out of the golfer’s hands and struck the instructor in the head, injuring him.

Which of the following statements is most correct in a battery action brought by the instructor against the golfer?

The instructor will not succeed, unless the golfer acted unreasonably in swinging the club at her instructor.

The instructor will succeed, because the golfer knew that these consequences would result.

The instructor will not succeed, because the golfer did not directly strike the instructor herself.

‘The instructor will succeed, because the golfer intended to cause the instructor reasonable apprehension of imminent harmful contact.

The instructor will not succeed, because the golfer did not intend any contact with the instructor

Answer 44

(E) The instructor will not succeed. To establish a prima facie case for battery, the claimant must show an intentional direct application of unlawful force to the claimant’s person by the defendant. The golfer did not intend to apply any force to the instructor. Here, the golfer was standing behind the instructor and was intending only to show the other golfers how annoyed she was. Therefore, she will not be guilty of battery. (A) is incorrect because it describes the standard in an action for negligence, which is not relevant to battery. However, note that the instructor may be able to recover against the golfer in a negligence action if the golfer acted unreasonably in swinging the club, but this does not establish intent for a battery action. (B) is incorrect as she did not intend or know that these consequences would result. (C) is incorrect as the direct contact needed for battery can be satisfied either by the defendant directly coming into contact with the claimant or by the defendant coming into contact by throwing a projectile (such as a golf club) at the claimant. (D) is clearly wrong, as there is no intention by the golfer to cause the instructor reasonable apprehension of contact.

Question 45

During an action for breach of contract, the defendant testified in court that she withheld shipment of the goods because the claimant defrauded her. The claimant now wishes to sue the defendant for defamation because he can establish that this testimony was false.

Will the claimant be successful in this action?

Yes, if he can show that the defendant acted out of malice towards him.

No, because the statement was protected by absolute privilege.

Yes, if he can show that the defendant did not believe the allegation to be true.

No, because the statement was only made orally in court and so was not published.

Yes, because the statement would be likely to lower the claimant in the eyes of right-thinking members of society and would be likely to cause serious harm to the claimant’s reputation

Answer 45

B) The claimant will not be successful because the defence of absolute privilege applies. All statements made in judicial proceedings are absolutely privileged. Because the defendant was testifying in court regarding the claimant’s conduct, the statement is absolutely privileged regardless of its truth or falsity. (A) is not correct. The defence of absolute privilege is not defeated by showing that the defendant acted with malice. Therefore, on these facts, no action in defamation could successfully be brought even if the claimant could show that the defendant acted out of malice. (C) is not correct. If the defendant made the defamatory statement without an honest belief in its truth, she would be acting with malice. However, this would not defeat the defence of absolute privilege. (D) is not correct. A statement is published when it is communicated to a third party, so an oral statement made in court would satisfy this. (E) is not correct. This choice outlines the requirements to be satisfied if a statement is to be defamatory. However, on the facts, the defamatory statement is protected by the defence of absolute privilege, as discussed above.

Question 46

The Secretary of State has announced that they intend to create a compensation scheme for homeowners who lost their homes during recent flooding in the south east of England. The Secretary of State also announced that they would consult with those affected when developing the scheme. However, two weeks later, and before the consultation process had been completed, the Secretary of State launched the compensation scheme, detailing who would qualify and the levels of compensation payable.

A homeowner who was affected by the flooding but who would not qualify under the scheme announced by the Secretary of State wishes to challenge the scheme. The homeowner files an application for judicial review.

Which of the following bases for the homeowner’s judicial review application is most likely to succeed?

The Secretary of State has not given effect to a legitimate expectation of consultation.

The Secretary of State has not complied with the general statutory duty to consult.

The Secretary of State has not complied with the general common law duty to consult.

The Secretary of State has not complied with the rules on natural justice.

The Secretary of State has not given effect to a substantive legitimate expectation.

Answer 46

A) The homeowner is most likely to prevail on the basis that the Secretary of State failed to give effect to a legitimate expectation of consultation. A public body can give rise to a legitimate expectation that it will exercise its powers in a certain manner, either by an explicit promise or by prior conduct. Here, the Secretary of State explicitly promised to consult with those affected by the flooding, thereby giving rise to a legitimate expectation which the Secretary of State failed to fulfill. (B) and (C) are incorrect because there is no general duty to consult imposed either by statute or by the common law. (D) is incorrect because, on these facts, there is no evidence of a breach of the rules of natural justice (that is, the rule against bias and the right to be heard). (E) is incorrect because the Secretary of State’s conduct gave rise to an expectation of consultation, which is a procedural rather than a substantive legitimate expectation

Question 47

A claimant was in a very serious car accident and was hospitalised for several months. The claimant had to undergo several complex surgeries as a result of the accident.

In which of the following courts should the claimant initiate proceedings?

The High Court, Queen's Bench Division.
The High Court, Chancery Division.
The Crown Court.
The Magistrates' Court .
The County Court.

Answer 47

C) The action should be initiated in the High Court, Queen’s Bench Division, because the claim is likely to be considered complex due to the extensive surgeries and to exceed the County Court’s £50,000 threshold. (A) is incorrect for this reason as well. (B) is incorrect; the Magistrates’ Court is primarily a criminal court for minor offences. (D) is incorrect the Chancery Division hears cases involving land contracts, trusts, and wills. (E) is incorrect. The Crown Court deals with more severe criminal cases.

Question 48

A misrepresentation is a false statement of fact or law that induces a party to enter into a contract.\

In which of the following situations would a misrepresentation generally not be recognised?

The party making the statement has made a partial nondisclosure.

The contract is one of utmost good faith.

The party making the statement has failed to correct a previous representation.

The party making the statement has failed to disclose material facts.

The party making the statement is in a fiduciary relationship with the party that they are making the statement to.

Answer 48

(D) As a general rule, silence will not amount to a misrepresentation. This is because the law requires a false statement (a positive act). There is no general duty to disclose facts. Therefore, (D) is the correct answer. (A) is incorrect because partial nondisclosure (or half-truths) is an exception to the general rule regarding silence, as even though the statement is technically true, it is misleading. (B) is incorrect because contracts uberrimae fidei (of utmost good faith) require the parties to make full disclosure, and are therefore another exception to the silence rule. (C) is incorrect because a party making a representation that was initially true has a duty to correct it if it turns out to be false before the contract is concluded. (E) is incorrect because as a general rule, parties in a fiduciary relationship with each other (that is, where there is a duty of trust and confidence) should make disclosure. Silence would not be acceptable.

Question 49

A manufacturer of car parts enters into a contract with a supplier of machinery for the installation of an additional welding machine at a cost of £750,000, to complement its existing machine and allow it to build up future production. The contract between the parties includes the following clause: ‘If the machine is not supplied within the contractually agreed time, the supplier will pay to the manufacturer a sum of £200,000 for each week that the manufacturer is without the machine’. There is a delay of three weeks in delivery of the welding machine, so the manufacturer brings a claim against the supplier for damages of £600,000.

Will the manufacturer’s claim succeed?

Yes. This was a term in the contract between the parties. The manufacturer has a valid claim.

Yes. This is a genuine pre-estimate of the loss that will be suffered by the manufacturer so the clause is valid and the claim is likely to succeed.

Yes. There is a clear breach of contract for which the manufacturer is entitled to bring a claim. As the amount is quantified in the contract, the courts are not required to determine the sum payable.

No. The sum set out in the clause appears to be extravagant and exorbitant in relation to the manufacturer’s interest that it is designed to protect.

No. As this is not genuine compensation for the manufacturer’s loss, it is an unliquidated damages clause and therefore not enforceable.

Answer 49

D) A liquidated damages clause represents the parties’ genuine attempts to pre-estimate the loss that may be suffered under the contract. Any clause that is extravagant, exorbitant, or unconscionable in relation to the legitimate interests of the party it is supposed to be protecting is likely to be viewed as a penalty clause by the courts and will not be enforceable. In the scenario, we are not told what loss the manufacturer is likely to suffer as a result of the delay in delivering the welding machine, but we are told that it is an additional machine, so the manufacturer will not be without one entirely. It is also suggested that the manufacturer will use the new machine to build up its production in the future, so it does not seem to have any specific business in mind which it risks losing if the machine is delivered late. The clause enables the manufacturer to claim nearly the entire contract price of the machine even after only a three-week delay, so it seems likely that the clause would be viewed as a penalty. (A) is incorrect because, irrespective of an agreed contract between the parties and a clear breach, a damages clause will be struck out if it is viewed by the courts as being penal in nature. (B) is incorrect because the clause does not appear to be a genuine pre-estimate of loss given the amount that would be payable in relation to the overall contract price. The test is whether the sum is extravagant or unconscionable in relation to the loss suffered by the innocent party to the breach. (C) is incorrect as it is irrelevant that the parties have agreed the damages payable if they are penal in nature, as discussed above. (E) is incorrect because unliquidated damages are what the courts will determine are payable in cases where there is no attempt by the parties to quantify the loss by way of a liquidated damages clause.

Question 50

Two professional opera singers, a soprano and a tenor, each entered into a contract to perform in a sell-out production of Madame Butterfly at the Royal Opera House. Their contractual obligations were for six weeks of rehearsals prior to the opening night, and two weeks of daily performances. The soprano missed the first two weeks of rehearsals, and the tenor missed several weeks of rehearsals and also the opening night. The opera promoters have terminated both their contracts and booked alternative singers.

Are the promoters legally able to take this course of action?

Yes, both singers have breached a term of their contract enabling the promoters to bring the contract to an end and hire alternative singers.

Yes, in respect of the tenor, because failing to appear on the opening night is breach of a condition of the contract.

Yes, in respect of the soprano, because failing to attend several days of rehearsals is a breach of a condition of the contract.

No, neither singer has breached their contract sufficiently to warrant such a course of action by the promoters.

No, because the promoters did not give the singers notice of their intention to bring the contracts to an end.

Answer 50

B) Breach of a condition constitutes a fundamental breach of contract, going to the root of it, and therefore entitling the innocent party to accept the repudiation and terminate the contract. (B) is therefore correct, as an opera singer missing the opening night of a show in which they have been contracted to perform would go to the root of the contract. (A) and (C) are incorrect as missing a few days of rehearsals is of less importance, and unlikely to go to the root of the contract, so this kind of breach is more likely to be viewed as a breach of warranty which only entitles the innocent party to damages, but does not give them the right to terminate the contract. (D) is incorrect because failing to appear on the opening night is a fundamental breach and likely to be seen as a breach of a condition of the contract. (E) is incorrect as there is no requirement that the innocent party to a breach of contract warn the other party that they intend to bring the contract to an end, all that is required is that they accept the repudiatory breach, and the actions of the promoters in booking an alternative singer would be sufficient for this.