M VII

Question 1

A farmer was having trouble with his tractor and called a mechanic out to repair it. The mechanic discovered an issue with the tractor’s wiring and repaired that. The farmer also asked the mechanic to change the oil in the tractor. The mechanic failed to properly tighten the tractor’s drain plug. All of the oil leaked out, and because the mechanic did not properly repair the tractor’s wiring, the tractor’s low oil light did not warn of the situation. As a result, the tractor’s engine seized. It will cost £7,000 to repair the tractor.

The mechanic denies liability. The parties have complied with pre-action protocol but have failed to resolve their differences. As a result, the farmer issues a claim form against the mechanic in the County Court Money Claims Centre (‘CCMCC’). The farmer lives in Manchester and the mechanic is based in Brighton.

Which of the following best describes how the claim will be managed?

The claim will stay in the CCMCC as it is a low value claim.

The claim will be transferred to the Brighton County Court Hearing Centre following receipt of a defence or admission.

The claim will be transferred to the Brighton County Court Hearing Centre post issue.

The claim will be transferred to the Manchester County Court Hearing Centre following receipt of a defence or admission.

The claim will be transferred to the Manchester County Court Hearing Centre post issue.

Answer 1

(B) The claim will be transferred to the Brighton County Court Hearing Centre post issue. Following receipt of a defence or admission, the court will normally transfer a claim to the hearing centre local to the defendant’s home address (if the defendant is an individual) or the claimant’s preferred hearing centre (if the defendant is a company). (A) is incorrect because the CCMCC is effectively an online portal which does not have the capacity to try claims. (C) is incorrect because transfer only takes place after receipt of a defence or admission. (D) and (E) are incorrect because they indicate the wrong County Court as the defendant is a sole trader and not a company.

Question 2

A company has 1,000 £1 ordinary shares and 1,000 £1 8% cumulative preference shares. In year 1 the company makes a loss of £5,000, in year 2 the company makes a profit of £4,000, and in year 3 the company makes a profit of £10,000.

What is the correct position as regards the company’s ability to pay dividends in each of the three years?

The company cannot pay a dividend in year 1 or 2, but the preference shareholders will receive an £80 dividend in year 3.

The company cannot pay a dividend in year 1 or 2, but the preference shareholders will receive a £720 dividend in year 3.

The company cannot pay a dividend in year 1 or 2, but the preference shareholders could receive a dividend of £240 in year 3.

The company cannot pay a dividend in year 1 or 2, but the preference shareholders could receive a dividend of £2,160 in year 3.

The company may pay the preference shareholders a dividend of £80 in years 1, 2, and 3, but the ordinary shareholders may receive a dividend only in year 3.

Answer 2

C) The company cannot pay a dividend in year 1 or 2, but the preference shareholders could receive a dividend of £240 in year 3. Dividends are payable out of profits available for the purpose, which means accumulated realised profit less accumulated realised losses. Therefore, no dividend is payable in years 1 or 2 because the company has made a loss of £5,000 in year 1 and only £4,000 of the loss was erased in year 2, leaving the company with a £1,000 loss in year 2. In year three, the company made £10,000 profit. The first £1,000 will erase the loss leftover from year 2. Thus, the company has £9,000 left for dividends in year 3. Dividends of cumulative preference shares will roll over to the next year if there are no profits available. Therefore, the £80 dividend that the preference shareholders are entitled to per year will roll over until profits become available, that is, in year 3 in this scenario. So the preference shareholders may be paid their £240 accumulated dividends. The remainder of the profit (£8,760) can be paid to the ordinary shareholders. (A) is incorrect because it does not take into account the dividends that the preference shareholders were entitled to in years 1 and 2. (B) is incorrect both because it is based on 8% of the entire profit (preference shareholders get a preference based on the price they paid for their shares rather than on the profit available) and because it does not take into account the cumulative effect. (D) is incorrect because it likewise is basing the preference on the amount available for distribution rather than on the price paid for the preference shares. (E) is incorrect because the preference shareholders will not receive a dividend in years 1 and 2 as there are no profits available for the purpose.

Question 3

Which of the following best describes the information that needs to be included in the baking company’s statement of case?

A statement of the court’s jurisdiction, details of the contract, and a statement of truth.

A statement of the applicable limitation period, details of the contract, and a statement of truth.

Details of the contract, the basis of any interest claim, and a statement of truth.

A statement of the court’s jurisdiction, a statement of the applicable limitation period, and details of the contract.

A statement of the applicable limitation period, details of the contract, and the basis of any interest claim.

Answer 3

C) Details of the contract, the basis of any interest claim, and a statement of truth would all be needed in the Particulars of Claim for a breach of contract claim. The Practice Direction requires the Particulars to include enough information to allow the parties and the judge to identify the issues in the case early and to enable the judge to give directions to ensure that the trial can proceed promptly, fairly, and proportionately. The Particulars of Claim must also include a statement of truth. In every breach of contract case, details about the contract and breach should be given, and if interest is being claimed, the basis for that interest should be included. On the other hand, there is no need to include a statement of the limitation period or a statement of the court’s jurisdiction. If the defendant believes the court lacks jurisdiction or that the limitation period expired, these are defences that the defendant must raise.

Question 4

A claimant initiated a negligence action against a defendant in the County Court. The case is before a District Judge. The claimant fails to recover when the District Judge makes an obvious error in applying the law. Due to this error, the claimant would like to appeal.

To which of the following courts would they appeal?

The High Court.
The County Court (to a Circuit Judge).
The County Court (to another District Judge).

Answer 4

D) When a civil case is heard by a District Judge of the County Court, an appeal would be to a Circuit Judge of the County Court. All of the other answers are incorrect. The Supreme Court generally hears civil appeals from the Court of Appeal, the Court of Appeal generally hears civil appeals from the High Court, the High Court generally hears civil appeals from Masters and decisions by a Circuit Judge of a County Court, and District Judges typically do not hear appeals.

Question 5

A man brings a civil claim for battery against another man when attempts at alternative dispute resolution fail. The claim alleges that the defendant hit the claimant with a beer glass whilst at a pub because the claimant made a derogatory statement about the defendant’s favourite football player. The claimant is seeking £20,000 damages.

The defendant believes the claimant is seeking too much money and is keen to make a Part 36 offer to limit the costs he might have to pay.

What is the shortest period the defendant may give the claimant to accept the offer for it to take effect as a Part 36 offer?

7 days
14 days
21 days
28 days
30 days

Answer 5

(C) A Part 36 offer must stay open for a minimum of 21 days. The time in which the offer may be accepted is called the relevant period.

Question 6

A company was incorporated several years ago with the Companies (Model Articles) Regulations 2008 (unamended) for private companies limited by shares as its articles of association. The company has four shareholders who are also the directors of the company. One of the directors wishes to retire from the company and transfer their shares to their child.
Which of the following statements best describes the power of the directors on the application of the child to register the share transfer?

The board must register the transfer of shares as it is a transfer to a member of an existing shareholder’s family.

The board must offer the shares to the existing shareholders in the same ratio as they already hold shares, and only if they decline the offer can the board register the transfer.

The board can register the transfer only after the members have approved the share transfer.

The board have an absolute power to refuse to register the transfer.

The board can refuse to register the transfer only if the stock transfer form is incorrectly completed.

Answer 6

The board have an absolute power to refuse to register the transfer.

Question 7

An investor subscribed for 200 £1 shares in a company but was only required to pay 50p per share on subscription. The investor was advised that he would not be required to make any further payment as regards the shares, and the company even passed a resolution to confirm this position. The company very quickly began to fail and soon became insolvent. The company now owes substantial sums to its creditors.

Which of the following best describes the position of the investor on the insolvency of the company?

The investor will receive back their capital contribution of £100.

The investor will not receive back their capital contribution of £100.

The investor will be required to pay an additional £100 by the liquidator.

The investor will be required to contribute personally to the debts of the company.

The investor is not required to make any further payments due to the resolution passed by the company.

Answer 7

(C) Shareholders can only be liable on an insolvency for any amount that remains outstanding on their shares. Shares can be allotted fully paid up, unpaid, or partly paid. If shares are fully paid up then the shareholder will have no liability to a liquidator on an insolvency. If shares are partly paid, that is, the full issue price has not yet been paid by the shareholder to the company, then the shareholder is obliged to pay any outstanding amounts. The investor would therefore be required to pay the additional £100 outstanding. (A) is incorrect because there is very little likelihood that the shareholders would be paid anything on an insolvency, as they would rank behind the creditors of the company who are unlikely to be repaid their debts in full. (B) is incorrect because, although it is correct that the investor will not receive back their capital contribution of £100, they would also be required to contribute the additional £100 outstanding on their shares. (D) is incorrect because this is a limited liability company, so the liability of shareholders is limited to their capital contribution and any amount outstanding on their shares. (E) is incorrect because the statutory obligation to pay any sums outstanding on insolvency would override the resolution passed by the company.

Question 8

A company wishes to change its name by special resolution and to give directors authority to allot preference shares by ordinary resolution. A written resolution is sent out to all eligible members on the 1st of the month, which was a weekday. The shareholdings in the company are:

Shareholder 1: 50%
Shareholder 2: 20%
Shareholder 3: 20%
Shareholder 4: 10%

The company has adopted the Companies (Model Articles) Regulations 2008 (unamended) as its articles of association.

Shareholder 4 signs and returns the resolution on the 5th of the month.
Shareholder 1 signs and returns the resolution on the 15th of the month.
Shareholder 2 signs and returns the resolution on the 20th of the month.
Shareholder 3 signs and returns the resolution on the 30th of the month.
Shareholder 3 signs and returns the resolution on the 30th of the month.

When were the resolutions passed?

Both resolutions were passed on the 20th of the month.

The written resolutions were not passed, as Shareholder 3 did not return the resolution in time.

The ordinary resolution was passed on the 15th of the month, and the special resolution was passed on the 20th of the month.

Both resolutions were passed on the 28th of the month.

The special resolution was passed on the 15th of the month, and the ordinary resolution was passed on the 20th of the month.

Answer 8

(C) The ordinary resolution was passed on the 15th of the month, and the special resolution was passed on the 20th of the month. A written resolution is passed once sufficient votes are returned to the company. To pass an ordinary resolution requires over 50% of the shares to vote in favour – this happened on the 15th of the month, as Shareholder 4’s 10% vote was received on the 5th and Shareholder 1’s 50% vote was received on the 15th. A special resolution requires a majority of 75%, which was reached on the 20th when the company received Shareholder 2’s 20% vote in addition to the 60% already received. (A) is incorrect as the resolutions can be passed at different times, and the ordinary resolution had received enough votes by the 15th. (B) is incorrect. It is true that a shareholder’s vote must be received within 28 days of the date the resolution was circulated and that, therefore, Shareholder 3’s vote was received too late to count. However, the written resolutions passed as soon as enough votes were returned; it does not matter whether all of the members return their resolution. (D) is incorrect, as although the written resolution lapses on the 28th day after circulation, the resolutions will be passed as soon as enough votes are returned to reach the requisite majorities. (E) is incorrect as an ordinary resolution requires a majority of over 50%, which was reached on the 15th, and a special resolution requires a majority of 75%, which was reached on the 20th

Question 9

A young woman inherited 50 £100 8% cumulative preference shares. The company was happy to register the woman as the new owner of the shares.
To which of the following rights is a holder of a company’s cumulative preference shares always entitled?

Conversion of the preferred shares into ordinary shares.

Voting rights.

Dividends to be rolled over from years in which dividends were not paid, to future years.

Guaranteed dividends.

A fixed percentage dividend based on the company’s profitability.

Answer 9

(C) A cumulative preferred dividend means that the holders of these shares are entitled to a dividend each year, but to the extent that there are no profits available for the purpose, the dividend will be carried forward until profits are available. (A) is incorrect as preference shares do not carry a right to conversion. (B) is incorrect because it is unlikely that preference shares will carry voting rights (except in relation to decisions that affect that particular class of shares), as it is usually ordinary shares that have full voting rights. (D) is incorrect as no dividends are guaranteed. There must be profits available for the purpose, as it is expressly prohibited by the Companies Act 2006 to pay a dividend out of capital. (E) is incorrect because a preference share gives a fixed percentage dividend based on the nominal value of the shares, not the company’s profitability.

Question 10

A company has adopted the Companies (Model Articles) Regulations 2008 (unamended) as its articles of association. It has three equal shareholders who are also the only directors. The company wishes to award a three-year service contract to one of the directors.

Which of the following best describes the procedure to award the service contract to the director?

The board must first approve the contract by special resolution and the shareholders must then approve the contract by special resolution.

The contract need only be approved by a majority of the three directors to be valid.

Such a contract cannot be approved through any process because it is for more than two years.

The contract can be approved by a majority vote of either the directors or the shareholders.

The board must first adopt a resolution approving the contract and then it must be approved by the shareholders by ordinary resolution.

Answer 10

(E) The board must first adopt a resolution approving the contract and then it must be approved by the shareholders by ordinary resolution. A service contract of up to two years can be entered by the board alone, but a contract over two years must be approved by board resolution and then voted on by the shareholders as an ordinary resolution (that is, a resolution that requires only a majority for approval). (A) is incorrect as there is no “special resolution” by directors and, as just indicated, the shareholders can approve through ordinary resolution. (B) is incorrect as the directors still need to vote on the contract as shareholders despite the fact that the three directors are also the only shareholders. (C) and (D) are incorrect for the reasons indicated above-contracts of more than two years can be approved, but the shareholders must be involved as well as the directors. (D) is incorrect as the service contract is awarded by the board after the members have approved the duration.

Question 11

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.

• A warehouse was sold to a director three years ago for £10,000. The director sold the property last year for £50,000.
• A carpark was sold to a developer for £15,000 18 months ago. After obtaining planning permission to redevelop the carpark for residential use, the carpark was sold for £100,000.
• An oil painting which had hung in the board room was sold for £5,000 at auction 10 months ago. The purchaser resold the painting two months later for £10,000.

All of the transactions.

The sale of the carpark and the sale of the painting only.

The sale of the carpark only.

The sale of the painting only.

The sale of the warehouse and the sale of the oil painting only.

Answer 11

(B) The sale of the carpark and the sale of the painting both are within the relevant time period. The relevant time period for a transaction at an undervalue is within two years of a company’s insolvency. (A) and (E) are incorrect as the sale of the warehouse falls outside of the two-year period. (C) and (D) are incorrect as they each include only one of the transactions made within the relevant time frame.

Question 12

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’s providing the firm with details about the witnesses. The firm denies it was provided with these details.
Standard disclosure in the professional negligence case has now taken place in accordance with directions. Whilst the firm has disclosed most of its file of papers, the merchant maintains that a note of her attendance at the solicitors’ office, when she initially provided details of the witnesses, is missing. The note is crucial to the success of her case.
What should the claimant be advised to do?

The claimant should write to the court stating that the defendant’s disclosure is inadequate, with the reasons why.

The claimant should make an application for specific disclosure of the note.

Answer 12

(C) A party who is not content with the disclosure provided by an opponent has a few options, including filing an application for specific disclosure. The claimant can very specifically identify the documents that it seeks. If the court orders the defendant to supply it, they will have difficulty avoiding disclosure if the document exists. If it does not exist, it will certainly be a point for cross-examination at the trial, and it will be for the court to determine any inference that it may wish to draw from its absence. (A) is incorrect because writing to the court will have no effect.

Question 13

A charity is considering forming as a company limited by guarantee to take advantage of separate legal personality, and because they will not be required to have the word ‘limited’ at the end of the company’s name.

Which of the following best describes the liability of a member of a company limited by guarantee?

The members’ liability is limited to the amount agreed to be guaranteed at any time.

The members’ liability is limited to the amount agreed to be guaranteed in the event of the company being wound up.

Answer 13

(E) A company limited by guarantee requires its members to pay a fixed, guaranteed amount (usually £1) in the event of the company being wound up. (A) is incorrect as a company limited by guarantee has no shareholders (for obvious reasons) but the company must have at least one member (or guarantor). (B) and (C) are incorrect as a company limited by guarantee limits the liability of its members to the amount they have guaranteed on a winding up. (D) is incorrect because the guaranteed amount is not required to be paid at any time, only on the winding up of the company.

Question 14

A woman brings a breach of contract claim against a builder for £25,000, alleging that the builder failed to properly complete an extension the builder added to the woman’s home. The woman claims that after she paid the builder, she discovered that the extension is smaller than agreed and used material inferior to those agreed. The builder maintains that he completed the work as agreed. Nonetheless, the builder sends the woman a Part 36 offer of £8,000. The offer’s deemed service date is 1 June, and it gives the woman 21 days to accept.

The woman does not accept the offer and the claim proceeds to trial. Although the court agrees that the extension was smaller than agreed, it finds that the materials were adequate and awards the woman £7,000.

What costs order would you expect the trial judge to make?

The builder pays the woman’s costs until 1 June, and the woman pays the builder’s costs thereafter.

The builder pays the woman’s costs until 23 June, and the woman pays the builder’s costs thereafter.

Answer 14

B) The builder likely will be ordered to pay the woman’s costs until 23 June, and the woman likely will be ordered to pay the builder’s costs thereafter. If a defendant makes a Part 36 offer, the claimant does not accept the offer, and the claimant wins the claim but does not beat the offer at trial, the defendant will usually be ordered to pay the claimant’s costs up to the end of the relevant period of the defendant’s offer, and the claimant will usually be ordered to pay the costs the defendant incurred thereafter. The relevant period is the deemed delivery date plus the time (not less than 21 days) during which the offeror says the offer may be accepted. Here, the woman the offer was to settle for was £8,000, the woman won, but was awarded only £7,000, and the relevant period ended 21 days after its 1 June deemed delivery date.

Question 15

A company secretary hired cars from a third party, stating that they were for use in the company’s business. However, the company secretary was lying and used the cars personally.

Would the company be liable to pay for the cars?

Yes, because the company secretary had express authority to enter into a contract of this nature.

Yes, because the company secretary had implied authority to enter into a contract of this nature.

Yes, because the company secretary had apparent authority to enter into contracts of this nature.

No, because the company secretary was acting outside their authority to enter into a contract of this nature.

No, because the company secretary does not have authority to enter into contracts on behalf of a company at all.

Answer 15

(C) The company secretary’s powers are usually expressly delegated by the board of directors, but their authority can also be apparent (or ostensible). This means that the company can be bound by the acts of a company secretary even if they were not authorised by the board, if the contracts the company secretary entered into were of an administrative nature, that is, of the type that a third party could reasonably assume would be within the powers of the company secretary. Case law has shown that ordering cars would fall within this.

Question 16

A claimant wishes to serve a notice to her employers (defendant) requiring them to prove the authenticity of a document tendered as evidence that they have not been negligent or in breach of their statutory duty. The defendant disclosed the document as part of standard disclosure.

What is the latest date on which the notice may be served?

No later than 14 days before trial or seven days after disclosure, whichever is earlier.

No later than 21 days before trial or 14 days after disclosure, whichever is earlier.

No later than the last date available for the exchange of witness statements or within seven days of disclosure, whichever is later.

No later than the last date available for the exchange of witness statements or within seven days of disclosure, whichever is earlier.

No later than the last date available for the exchange of witness statements or within 14 days of disclosure, whichever is earlier.

Answer 16

(C) The claimant must serve the notice no later than the last date available for the exchange of witness statements. If it had been the case that the defendant had served the document late in the case, after witness statement exchange, the claimant must serve the notice within seven days of disclosure. It follows that the other choices, stating different time periods, are incorrect.

Question 17

A solicitor is outlining to his client the important component parts of the disclosure list in a fast track case before asking the client to sign the disclosure statement.

Which of the following statements most accurately describes the three sections of the disclosure list?

Documents the party controls, documents that party controlled but no longer does, and a list of witnesses whom the party plans to have testify at trial.

Documents the party controls but as to which the party objects to the other party inspecting, the steps taken to conduct the search, and a list of witnesses the party plans to have testify at trial.

Documents the party controls, documents that party controlled but no longer does, and the steps taken to conduct the search.

Documents the party controls and does not object to the other party inspecting, documents the party controls but does object to the other party inspecting, and documents no longer in the party’s control.

Documents the party controls, the steps taken to conduct the search, and the certification of duty.

Answer 17

(D) The three sections of the disclosure list are: documents the party controls and does not object to the other party inspecting, documents the party controls but does object to the other party inspecting, and documents no longer in the party’s control. (A) is incorrect because a list of witnesses is not one of the sections. (B) is incorrect for the same reason and because the steps taken to conduct the search is part of the disclosure statement rather than the disclosure list. Thus, (C) is incorrect as well. The same is true for the certification of duty included in choice (E); it’s part of the disclosure statement rather than the list.

Question 18

A company has appointed a new financial controller with instructions to save costs and increase efficiency. One suggestion the controller has made in order to improve cash flow is to delay paying suppliers until the company’s customers have paid the company. 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 still owed £500 in respect of an unpaid judgment despite a bailiff’s attending the company’s premises.

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

Answer 18

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

Question 19

A solicitor meets with a prospective client following a road traffic accident. The client tells the solicitor that after the collision, she called the police to attend. The solicitor notes this in the solicitor’s file.

Sometime later, when the police report arrives, and after speaking to witnesses, the solicitor suspects that the client might not have called the police to attend. The solicitor raises this with the client, and the client apologises and says that she was confused in the aftermath of the accident, and that she had not called the police to attend.

The solicitor knows that the note must be disclosed, but is there any ground to object to inspection?

No, there are no grounds available under the facts on which to object to inspection.

Yes, the solicitor may object to inspection on the basis of legal advice privilege.

Yes, the solicitor may object to inspection on the basis that litigation privilege protects the document.

Yes, the solicitor may object to inspection on the basis that common interest privilege protects the document.

Yes, the solicitor may object to inspection on the basis that without prejudice privilege protects the document.

Answer 19

(B) The document is disclosable as it adversely affects the client’s case, but the party can object to inspection on the basis of legal advice privilege, as this protects against disclosure of all documents relating to interaction between the solicitor and their client. (A) is incorrect because there is a valid objection to inspection based on legal advice privilege. (C) is incorrect because litigation privilege relates to communications with third parties (for example, experts and barristers) for purposes of preparation for trial; it does not apply to communication between a solicitor and client, which is protected by legal advice privilege. (D) is incorrect because common interest privilege applies in situations where there are multiple parties on one side of the case who send communications amongst themselves - the privilege can be asserted to prevent disclosure of those communications. (E) is incorrect because without prejudice privilege applies to communications between opposing parties with a view toward negotiation or settlement.

Question 20

A sole trader has been advised by an insolvency practitioner to enter into an individual voluntary arrangement (‘IVA’). The sole trader owes the following amounts as unsecured debts:’

• £1,000 to Creditor 1
• £2,000 to Creditor 2
• £11,000 to Creditor 3
• £25,000 to Creditor 4

Which of the following correctly represents the creditors who must vote in favour of the proposals for the IVA to be approved?

Creditors 1, 2, and 3.
Creditor 4 only.
Creditors 3 and 4.
Creditors 1, 2, and 4.
All the creditors must vote in favour.

Answer 20

C) Approval of an IVA requires the agreement of the debtor’s unsecured creditors holding at least 75% in value of unsecured debt. If such approval is obtained, the practitioner’s proposals become binding on every ordinary unsecured creditor who has notice of the meeting. Creditors 3 and 4 are needed to hit the 75% threshold. (A) and (B) are incorrect because although these choices include 75% of the number of creditors, together they do not hold 75% of the outstanding debt, which is what is required. (B) is incorrect because although Creditor 4 is the largest creditor, alone (B) does not hold 75% in value of the debt. (E) is incorrect as not all of the creditors must vote in favour-it is sufficient to have only 75% in value. Thus, Creditors 1 and 2 need not vote in favour.

Question 21

A company grants a charge over its premises to secure a loan being made by its bank.

Which of the following best describes the filing requirements at Companies House following the grant of the charge?

A copy of the charge, the requisite form, and the fee must be filed at Companies House within 15 days of the creation of the charge.

A copy of the charge, the requisite form, and the fee must be filed at Companies House within 21 days of the creation of the charge.

A copy of the charge and board resolution authorising the charge, the requisite form, and the fee must be filed at Companies House within 15 days of the creation of the charge.

A copy of the charge and board resolution authorising the charge, the requisite form, and the fee must be filed at Companies House within 21 days of the creation of the charge.

A copy of the charge and members’ resolution authorising the charge, the requisite form, and the fee must be filed at Companies House within 21 days of the creation of the charge.

Answer 21

(B) Following the grant of a charge, the company must file the fee, a copy of the charge, and the requisite form at Companies House within 21 days. (A) and (C) are incorrect as they have the wrong deadline for filing. (C) is also wrong because there is no requirement that a board resolution be filed too. (E) is incorrect because the members don’t approve charges and so there is no need to file a members’ resolution.

Question 22

A private limited company was incorporated with the Companies (Model Articles) Regulations 2008 (‘the Model Articles’) as its articles of association. The company has issued new ordinary shares to a new investor in order to raise more capital for expansion.

What must be filed with the Registrar of Companies following the issue of the new shares?

Answer 22

(A) The Return of Allotment of Shares form together with any necessary shareholders’ resolutions must be filed with the Registrar of Companies following the issue of new shares. When a company issues additional ordinary shares for cash after the initial share allotment, the existing shareholders have a pre-emption right to purchase a proportional amount of the new shares to allow them to maintain their current ownership interest in the company. Since the shares here were issued to a new investor, the members also had to pass a special resolution to disapply the statutory pre-emption rights. Thus, that resolution had to be filed too.

Question 23

A solicitor is working on a conveyance for their client. The client sends the solicitor a cheque for £2,000 to be held on account of costs of the conveyance.
Which one of the following entries would be the most appropriate entry to record this receipt?

Credit Cash Account - Client Side; Debit Client ledger - Client Side

Debit Cash Account - Client Side; Credit Client ledger - Client Side

Credit Cash Account - Business Side; Debit Client ledger - Client Side

Credit Cash Account - Business Side; Debit Client ledger - Business Side

Debit Cash Account - Business Side; Credit Client ledger - Business Side

Answer 23

(B) This receipt is client money so it must be shown as a credit entry on the client side of the client ledger, and the corresponding entry would be a debit on the cash account client side, as it is money that the firm now owes to the client. (A) is incorrect because it shows the entries for a payment from the client account, not a receipt.

Question 24

A solicitor is attending a property auction representing a client. A week before the auction, the client pays the law firm £250 in cash for auctioneers’ fees, and requests that the solicitor pay the auctioneers’ fees on the day of the auction.
Which of the following statements describes how the solicitor should deal with the receipt of £250 from its client?

The law firm should record the receipt of the money on the client ledger and place the cash in the client bank account.

The law firm should place the cash in a safe until the day of the auction and should not make any entry in the client ledger.

The law firm should place the cash in a safe until the day of the auction and record the receipt of client money on the client ledger.

The law firm should treat the cash payment as payment of a disbursement and place it in the business account until the day of the auction.

The law firm should open a new client ledger for the auctioneer.

Answer 24

A) The law firm should record the receipt of the money on the client ledger and place the cash in the client bank account. The law firm must treat the cash as client money because it has received the cash a week before the auction fees are due, and the rules require that client money be paid ‘promptly’ into a client account. (B) and (C) are incorrect because the auction is a week away and so it would be a breach of the SRA Accounts Rules to retain client money in a safe for a week. (D) is incorrect because the cash is client money (that is, money held or received for a client which is not business money) and should be paid into a client account. (E) is incorrect because the auctioneer is not a client of the law firm.

Question 25

A solicitor receives a £1,500 cheque from a client: £200 for payments the firm made to a surveyor, £800 for work done by the firm, and £500 to be used for future expenses incurred on the client’s behalf.

Which of the following statements is correct with regard to the cheque?

The business money element can be paid into the client account and remain there for as long as the client requires it.

The business money element can be paid into the client account but must be moved into the business account promptly.

The cheque must be split and placed into the requisite business/client accounts.

The entire amount of the cheque must be placed in the business account and the client element must be transferred into the client account promptly.

The entire amount of the cheque must be placed in the client account and the business element must be transferred into the client account within promptly.

Answer 25

(B) The entire sum can be paid into the client account, but the business element must be transferred out of the client account promptly. Funds received from mixed payments must be allocated promptly to the correct client account or business account. (A) is incorrect because it does not mention the money must be transferred promptly. (C), (D), and (E) are incorrect because of the word ‘must’. The money can be split, but this is not an absolute obligation and mixed receipts can be placed into either the client or business account first so long as the relevant money is transferred to the other account promptly.

Question 26

A firm of solicitors acts for a client in relation to a probate matter. On behalf of the client, the firm pays a bill from a valuation expert of £600 plus £120 VAT. The invoice is addressed to the firm.

Which of the following entries should the firm make with regard to the payment?

Debit £600 - Client side of Client x’s ledger.
Debit £600 - Business side of Client x’s ledger.
Debit £720 - Business side of Client x’s ledger.
Debit £720 - Client side of Client x’s ledger.
Credit £720 - Business side of Client x’s ledger

Answer 26

(B) The principal method of payment should be used, as the invoice is addressed to the firm. Therefore, the expense is the firm’s expense and business money must be used. (This is why (A) and (D) are incorrect.) £600 will be debited from the business side of the client’s ledger when the payment is made. The corresponding entries will be recorded on the firm’s cash ledger and VAT ledger. The VAT of £120 will be added to total VAT charged by the firm when it issues its bill of costs to the client. (C) is incorrect as the firm must record the net amount of the bill paid to the expert. (E) is incorrect as the firm is making a payment rather than placing money in the business account.

Question 27

A firm of solicitors is acting for a client in the purchase of a property for £400,000 in Essex. The client is putting £200,000 towards the cost of the purchase but requires a mortgage for the remaining £200,000. The institutional lender has agreed to advance the sum of £200,000 to the firm for the client.

Which of the following statements is correct with regard to the transaction?

The mortgage advance can be placed in the client account, but it must be clearly labelled as belonging to the lender until completion.

The mortgage advance must be placed in the business account, but it must be clearly labelled as belonging to the lender until completion.

Upon receipt of the mortgage advance, the firm must open a separate ledger account for the lender.

Answer 27

(C) A solicitor must record client money and show for which client they are holding the money. (A) is incorrect as the solicitor must show for which client they are holding the money. (B) is incorrect. This money belongs to the lender until completion. It is client money and client money should not be paid into the business account.

Question 28

In a residential property transaction, a solicitor’s client pays £250 in anticipation of search fees. The client telephones the solicitor’s secretary and makes a direct debit payment by telephone. The secretary has not yet ordered the relevant searches.

Which of the following entries would be the most appropriate entry to record this receipt?

Debit Client ledger - Client Side; Credit Cash Account - Client Side

Debit Client ledger - Client Side; Credit Cash Account - Business Side

Credit Client ledger - Client Side; Debit Cash Account - Client Side

Debit Client ledger - Business Side; Debit Cash Account - Business Side

Credit Client ledger - Business Side; Debit Cash Account - Business Side

Answer 28

(C) This receipt remains client money until the disbursement is paid or a bill is raised and it must therefore be shown as a credit entry on the client side of the client ledger (as opposed to a debit entry, as in (A)), and the corresponding entry would be a debit on the cash account, client side, as it is money that the firm owes to the client until the search fees are incurred. All the other options are incorrect as this is not business money as the firm has not incurred the disbursements and therefore should not be shown on the business side of the cash account or client ledger.

Question 29

Following a trial, a solicitor issues his client company an invoice for profit costs of £1,000 and VAT of £200.
On receipt of the £1,200 from the company, which entries should the solicitor record in his accounts?

The solicitor credits £1,000 on the business side of the client ledger, debits the business side of the cash account, and credits £200 on the HMRC (VAT) ledger.

The solicitor credits £1,200 on the business side of the client ledger and debits the business side of the cash account ledger.

The solicitor debits £1,000 on the client side of the cash ledger, credits the business side of the cash ledger, and credits £200 on the HMRC (VAT) ledger.

The solicitor debits £1,200 on the client side of the cash ledger and credits the business side of the cash ledger.

The solicitor credits £1,200 to the profit costs ledger

Answer 29

(B) When a client pays a bill for profit costs, the entire sum is credited to the business side of the client ledger and debited to the business side of the cash account ledger. (A) and (C) are incorrect because when a client pays an invoice, no entries are made on the HMRC (VAT) ledger. This ledger is simply a record of the sum owed by the solicitor to HMRC. (D) is incorrect because the money belongs to the solicitor as payment of professional charges included on a bill. It should therefore be recorded in the business side of the cash ledger. (E) is incorrect because on payment of a bill there is no entry in the profit costs ledger. This is simply a record of all invoices billed by the solicitor.

Question 30

A solicitor acts for a client who is registered for VAT. The solicitor is holding £1,000 on account for the client. The solicitor pays a surveyor’s bill of £700 plus £140 VAT out of the client’s funds, as the invoice is addressed to the client and there are sufficient funds held on account for the client. The firm’s profit costs are £1,000 plus £200 VAT.

Which of the following statements is incorrect?

The firm will provide the client with a VAT invoice for the VAT on its profit costs but not for the VAT on the surveyor’s bill.
The firm will provide the client with a VAT invoice for the VAT on its profit costs and the surveyor’s bill.
The firm will make an entry on its HMRC (VAT) ledger to record VAT of £200.
The firm will make an entry on the client’s ledger to record profit costs of £1,000.
The firm can use client money to pay the surveyor’s bill of £840.

Answer 30

(B) As the client is registered for VAT, the firm should send it a VAT invoice but only for the VAT that relates to the firm’s professional charges (profit costs) and not the VAT on the surveyor’s fee. So (A) is the correct procedure and (B) is not. (C) is a wrong choice because it reflects the proper procedure - the firm would record only the VAT that relates to the supply of goods or services provided by the firm (£200) and not that which relates to a third party. (D) also reflects correct procedure - all professional charges, once a bill has been sent, should be recorded on both the client ledger and the profit costs ledger. (E) reflects a correct procedure as long as there are sufficient funds in the client account.

Question 31

A trainee solicitor is dealing with several clients in a property department at a firm. He is uncertain as to whether money received from his clients is business or client money.

Which of following statements is untrue regarding money received by the firm?

A cheque received for £3,000 to be held on account of costs is client money.

Money received by the firm to be held in a trust is client money.

Money received to pay unpaid disbursements is client money, if a bill including those disbursements has not been sent to the client.

Money received in payment of professional charges included on a bill is client money.

Money received from a client as a deposit for the purchase of a new house is client money.

Answer 31

(D) Money received in payment of professional charges included on a bill is business money rather than client money. As long as the bill has been sent to the client and the client has sent a payment on the bill, the payment is business money. All of the other statements are true.

Question 32

A solicitor acts for a baker on a commercial transaction. The solicitor also acts for the baker’s son on a conveyance. The baker asks the solicitor to transfer £100,000 of her money to her son so that he may purchase a flat.

Which of the following entries will the solicitor make to record the transfer?

Debit Cash Account - Business Side; Credit Baker Ledger - Business Side

Credit Cash Account - Client Side; Debit Baker Ledger - Client Side

Debit Baker Ledger - Client Side; Credit Son Ledger - Client Side

Debit Cash Account - Client Side; Credit Baker and Son - Stakeholder Ledger - Client Side Ledger - Client Side

Debit Baker Ledger - Client Side; Debit Son Ledger - Client Side

Answer 32

C) When carrying out an inter-client transfer, the client cash account is bypassed and remains untouched, as you are simply recording the transfer of money from one client ledger to another client ledger. (A) and (B) are incorrect as there is no movement on the cash account. (D) is incorrect as the money is not being held for both clients jointly in a stakeholder account. (E) is incorrect as there should be a corresponding credit for every debit entry.

Question 33

A client sends in a cheque for £6,000 comprised of (1) payment of an outstanding bill recently sent to the client (£3,800, including VAT), and (2) money paid on account in respect of professional disbursements that have yet to be paid (£2,200) and that were not included in the bill.

How should this payment be treated?

The cheque must be paid into the client account, and the £3,800 must be transferred into the business account promptly.

The cheque can be paid into the client account, but the £3,800 must be transferred into the business account promptly.

The cheque must be paid into the business account, but the £3,800 must be transferred into the client account promptly.

The sums can be split and £2,200 paid into the business account and £3,800 paid into the client account.

The sums must be split and £2,200 paid into the client account and £3,800 paid into the business account.

Answer 33

(B) The cheque can be paid into the client account, but the £3,800 must be transferred into the business account promptly. When a firm receives a cheque that contains both business and client funds, the SRA Accounts Rules give two options: Either split the cheque or deposit the money into one account and transfer the relevant funds to the other account promptly. As many banks will refuse to split cheques, (B) is the best answer. (A) is incorrect because the money can be paid into the client account or it can be paid into the business account. (C) is incorrect because the cheque can be paid into the client account and not the business account. (D) and (E) are incorrect because there is no rule that the money must be split. Additionally, (D) has the split wrong: £2,200 would go to the client account and £3,800 to the business account, as stated in (E).

Question 34

A woman made a valid will five years ago. Amongst other gifts, the will left £5,000 to one of the witnesses of the will. Last year the woman validly executed a codicil to the will. The codicil increases the gift to the witness to £10,000, makes two additional new gifts, and confirms that the rest of the will is unamended. Different witnesses, who are unconnected to any beneficiaries, were present at the execution of the codicil. The woman has now died.

Which of the following statements best describes the effect of the codicil?

The gift of £10,000 to the witness of the original will is valid.

All three gifts in the codicil will fail, as the witnesses to the codicil should have been the same individuals who witnessed the will.

The three gifts in the codicil will be valid, but all gifts in the original will now fail.

The two new gifts in the codicil are valid, but the revised gift to the witness will fail.

The original witness will receive two gifts-one of £5,000 and one of £10,000.

Answer 34

(A) The gift of £10,000 to the witness of the original will is valid. A codicil is a document that adds to, amends, or partially revokes an existing will. It must be executed with the same formalities that are required for a will. A codicil may remedy a gift which was void because the beneficiary also witnessed the will. Here, the gift of £5,000 to the witness in the will is invalid because any gift to a beneficiary who is also a witness fails. However, this is remedied by the codicil, as there were different witnesses for the execution of the codicil. The gift of £10,000 is therefore valid. (B) is incorrect. There can be different witnesses for the codicil and the will. (C) is incorrect. The codicil makes clear that the rest of the will is unamended, and so other gifts remain effective.

Question 35

A man made a valid will 10 years ago, leaving most of his estate to his wife. Since then, the man separated from and subsequently divorced his wife. He then met his new partner. They got engaged last year and entered into a civil partnership this year.

Which of the following statements best describes the effect of these events on the man’s will?

The man’s will remains valid.

The man’s will was revoked when he separated from his wife.

The man’s will was revoked by his civil partnership.

The man’s will was revoked when his divorce was finalised.

The man’s will was revoked when he got engaged to his new partner.

Answer 35

(C) The man’s will was revoked by his civil partnership. A marriage or civil partnership revokes a pre-existing will unless it is clear from the will that: (1) the testator was expecting to marry or enter into a civil partnership with a particular person, and (2) the testator intended that the will should not be revoked by the marriage or civil partnership. Since the man made his will while still married to his wife, he could not have written it with the expectation that he would be entering into a civil partnership with his partner. Therefore, the testator’s civil partnership revoked the will. (A) is, therefore, incorrect, as the will has been revoked. (B) is incorrect, as a will is not revoked by separation. (D) is incorrect. If a testator divorces after executing a will, gifts to the testator’s former spouse will fail, but the will is not automatically revoked by the divorce. (E) is incorrect. Getting engaged does not revoke an existing will.

Question 36

A man made a will five years ago, leaving his assets to various family members. The man’s brother died last year, and the man himself died last month. The man’s brother was married and had a daughter, and his wife and daughter are still alive.

The man’s will included the following provisions:
(1) I give my car to my brother.
(2) I give the remainder of my estate to my son.
There are no other relevant clauses.
Which of the following best describes entitlement to the man’s estate?

The son will inherit the entire estate.

The brother’s wife will inherit the car, and the son will inherit the remainder of the estate.

The brother’s daughter will inherit the car, and the son will inherit the remainder of the estate.

The will is invalid due to lapse, as a key beneficiary has died. The estate will be distributed under the intestacy rules.

The brother’s wife and daughter will share the car equally, and the son will inherit the remainder of the estate.

Answer 36

(A) The son will inherit the entire estate. If a beneficiary has predeceased the testator, the gift to them will lapse-that is, fail. Here, the man’s brother has died before the man, so the gift of the car will lapse. The car does not pass to the brother’s wife or daughter. Instead, the car will form part of the residuary estate and will pass to the man’s son. (B), (C), and (E) are incorrect, as the man’s brother’s wife and daughter will have no claim on the car. If a testator makes a gift to a child or other issue who die before the testator and leave living issue, the living issue receive the gift. This rule does not apply here because the man’s brother is not his issue. (D) is incorrect. The lapsed gift will not affect the validity of the will itself. Only the lapsed gift will fail.

Question 37

A woman makes a will leaving a gift of “£20,000 to the children of my sister”. The woman dies a short time later and is survived by her sister, who has two children, aged 10 and 12. The sister is pregnant with a third child at the time of the woman’s death, and this baby is born a short time later.

How will this gift be distributed?

The gift of £20,000 will be divided between the 10-year-old and the 12-year-old only.

The gift of £20,000 will be divided between the 10-year-old, 12-year-old, and the baby.

The gift of £20,000 cannot be distributed until it is certain that the sister is not going to have any more children.

The gift of £20,000 will be divided between the 10-year-old, 12-year-old, and the baby, but if the sister has additional children, the gift will be redistributed accordingly.

The gift will fail for uncertainty.

Answer 37

(B) The gift of £20,000 will be divided between the 10-year-old, the 12-year-old, and the baby. A class gift is a gift of property to be divided among beneficiaries who fulfil a general description. Here, the class gift is to be divided among the children of the sister. Class closing rules apply to determine how and when a class gift should be distributed. Generally, a class closes-to the exclusion of any potential beneficiary not then living-when at least one beneficiary has a vested interest. When there is a vested gift, with no conditions that need to be satisfied, the class closes at the date of the testator’s death if there is any living beneficiary in the class. Here, the gift is vested because the children do not have to meet any condition to receive the gift. Consequently, the class closes at the date of the woman’s death, as the sister already has children, meaning that there is already at least one beneficiary with a vested interest. Accordingly, the £20,000 is divided equally between the living children of the sister-the 12-year-old, the 10-year-old, and the baby. For these purposes, the baby is treated as ‘living’ since the baby had been conceived at the time the woman died and was subsequently born alive. The class then closes, and any further children of the sister would not be entitled to a share of the £20,000.

Question 38

A mother died in an accident caused by the negligence of a driver. The mother was unmarried and had four children. Her two oldest children (aged 18 and 20) had left home and were no longer dependent on her. The other two children were aged 6 and 10 at the time of their mother’s death and were financially dependent on her. The mother left a will in which her estate was left to her two oldest children.

In respect of the claims that can be brought for the two children aged 6 and 10, which of the following statements is correct?

The children will only be entitled to recover the same damages as their mother would have recovered if she had survived.

The children will be entitled to recover the same damages as their mother would have recovered if she had survived, as well as damages for their loss of dependency on their mother and for damages for bereavement.

The children will be entitled to recover damages for their loss of dependency on their mother and damages for bereavement.

The children will be entitled to recover only damages for their loss of dependency on their mother.

The children will be entitled to recover only damages assessed as consolation for their grief on the loss of their mother.

Answer 38

(D) The children have a claim for their loss of dependency on their mother. This is their only claim. It is calculated by reference to the portion of the mother’s income which she would have spent on supporting them and the likely period for which such support would have continued. (There is also a separate claim for the benefit of the mother’s estate, but the two children aged 6 and 10 are not the beneficiaries of this claim because the estate was left to the two oldest children.) (A) is not correct. The two children aged 6 and 10 will rely on a new cause of action arising for their benefit as dependants. This allows them to recover their loss of dependency. It does not allow them to recover the damages which their mother would have recovered if she had survived. (B) is not correct. Of the damages listed in this choice, only the damages for loss of dependency are recoverable by the two children aged 6 and 10. (C) is not correct. The children are not entitled to recover damages for bereavement because these damages by statute are not applicable to children for the death of a parent. (E) is not correct. The children are not entitled to recover damages assessed as consolation for their grief, because bereavement damages are not available for the death of a parent.

Question 39

Under the Ferries Act 2018, the government has the power to set the prices of certain ferry services in the UK. Pursuant to the Act, the government has passed a regulation limiting the length of boats for hire on Lake Windermere. Both Houses of Parliament have approved the regulation. Before being approved, the regulation was debated in the House of Commons for just 60 minutes, and those MPs who represent constituencies in which Lake Windermere sits were unable to take part in the debate. The companies that provide boats for hire on Lake Windermere want to challenge the validity of the regulation.

On what basis could the regulation be challenged?

The regulation is ultra vires because insufficient time was allowed to debate the regulation in Parliament.

The regulation is ultra vires because it is outside the scope of the power granted to government by the Act.

The regulation is ultra vires because MPs for the constituencies where Lake Windermere is located did not take part in the debate on the regulation in the House of Commons.

The regulation cannot be challenged because the courts have no power to strike down secondary legislation.

The regulation cannot be challenged because it has been approved by both Houses of Parliament.

Answer 39

(B) The regulation could be challenged on the ground that it is outside the scope of the power granted by the Act (that is, it is ultra vires). The regulation is a piece of secondary legislation, which is legislation made under powers granted by an Act of Parliament. The power to make secondary legislation is limited by the Act of Parliament granting the power. Here, the Act gave the government authority to make regulations for the fares charged by ferry services. However, the regulation goes to the length of boats that may be hired on a specific lake. This is outside the scope of the power granted by the Act and so the regulation could be struck down on the basis that it is ultra vires. (A) and (C) are incorrect because they arrive at the correct result but for the wrong reason. The regulation is ultra vires because it exceeds the law-making authority granted by the Act, not because of the amount of time provided for debate or the fact that certain MPs were not part of the debate. In fact, the courts could not consider the parliamentary procedure by which the regulation was approved. (D) is incorrect because the courts do have the power to strike down secondary legislation which is ultra vires. (E) is incorrect because the fact that the regulation has been passed in both Houses will not prevent it from being challenged. As mentioned, the courts can strike down secondary legislation which is ultra vires.

Question 40

A motorist, driving carelessly, knocked over a pedestrian. The pedestrian suffered a broken wrist. However, the pedestrian then acted unreasonably by refusing to have medical treatment for the injury. As a result, the pedestrian’s wrist did not heal correctly, resulting in a permanent painful disability. The motorist has accepted responsibility for the initial broken wrist but denies liability for the permanent disability.

In a claim by the pedestrian against the motorist to recover damages for the permanent disability, which of the following statements is correct?

The pedestrian’s actions in refusing medical treatment amount to a new intervening act that breaks the chain of causation between her disability and the motorist’s negligence, so the claim in respect of the disability will fail entirely.

The pedestrian’s actions in refusing medical treatment amount to a new intervening act that breaks the chain of causation between her disability and the motorist’s negligence, so the claim in respect of the disability will succeed but the amount of damages for the disability will be reduced.

Because, ‘but for’ the motorist’s negligence, the pedestrian would not have been injured at all, the claim in respect of the disability will succeed in full.

The pedestrian’s actions in refusing medical treatment amount to a failure to take reasonable care for her own safety, which has contributed to the harm she suffered, so the claim in respect of the disability will fail entirely

The defence of voluntary assumption of risk will apply to the pedestrian’s refusal of medical treatment, so the claim in respect of the disability will fail entirely.

Answer 40

The pedestrian’s actions in refusing medical treatment amount to a new intervening act that breaks the chain of causation between her disability and the motorist’s negligence, so the claim in respect of the disability will fail entirely.

Question 41

A worker employed in a warehouse to open packaging was provided by his employer with a sharp knife to cut the packaging. Recently, as the worker was using the knife to cut open a parcel, the tip broke off the blade and a fragment of the metal struck him in the eye, causing a severe injury.

Enquiries have shown that the blade snapped because of a latent defect caused by a lack of care in the manufacturing process. The worker’s employer had purchased the knives from a reputable supplier.

In a claim by the worker to recover damages for his injury, which of the following is correct?

By establishing that there was a latent defect in the knife caused by the fault of the manufacturer, the worker can successfully pursue a claim in negligence against his employer, because the employer is deemed to have been negligent.

Establishing that there was a latent defect in the knife caused by the fault of the manufacturer does not enable the worker to successfully pursue a claim in negligence against his employer, because his employer was not at fault for the defect.

By purchasing the knife from a reputable supplier, the worker’s employer has complied with its duty to take reasonable care to provide safe equipment and so will not be liable to the worker.

The only claim which the worker can successfully pursue would be a claim against the manufacturer, since the manufacturer’s lack of care in the manufacturing process caused the defect in the knife.

Because the worker was not a party to the contract for sale of the knife, he cannot bring a successful claim against the manufacturer in respect of his injury caused by the defect in the knife.

Answer 41

knife.
(A) The worker can successfully pursue a claim in negligence against his employer. The Employer’s Liability (Defective Equipment) Act 1969 (‘the 1969 Act’) applies where an employee is injured in the course of employment by defective equipment provided by their employer. Provided that the defect is attributable to fault on the part of some third party, the employer is also deemed to have been negligent. (B) is not correct. Although the employer could not have discovered the latent defect in the knife and so was not actually at fault, on the facts the 1969 Act applies so that the employer is deemed to have been negligent. (C) is not correct. It is true to say that the employer may have complied with its common law duty to take reasonable care to provide safe equipment. However, the 1969 Act applies so that the employer is deemed to have been negligent. (D) is not correct. The worker may be able to pursue a claim against the manufacturer of the knife, but this would not be the only claim which he could successfully pursue. He could also pursue a claim against his employer, as discussed above. (E) is not correct. It is correct that the worker was not a party to the contract for purchase of the knife.

However, it is not correct to say that he could not bring a successful claim against the manufacturer in respect of his injury caused by the defect in the knife under the Consumer Protection Act 1987.

Question 42

A solicitor has been asked to act for a family who have been involved in a road traffic accident. The father was driving when colliding with a lorry. The father and one minor daughter, aged six, were both seriously injured, despite wearing their seat belts. The father wishes the solicitor to act for him and the daughter in suing the driver of the lorry for damages. The father alleges that the lorry was over the white line in the road in his lane, and that this is what caused the collision. The lorry driver alleges that the father was overtaking on a blind corner. Until last year the solicitor used to deal with civil claims such as this, but now deals primarily with criminal law.

Which of the following statements best describes how the solicitor should act in the circumstances?

The solicitor can act for the father, but not the daughter, because she is under 18.

The solicitor can act for the father, but not the daughter, because she cannot give direct instructions.

The solicitor can act for both the father and the daughter.

The solicitor can act for the father, or the daughter, but not both.

The solicitor cannot act for either of them because she now deals primarily with criminal law.

Answer 42

(D) The lorry driver is alleging conduct on the part of the father which might amount to contributory negligence. The daughter might have a claim against her father, which is a clear conflict of interest. Both (A) and (B) are incorrect. A minor is not to be denied legal representation just because they are under 18. (C) is incorrect because of the significant risk of a conflict of interest. (E) is incorrect, provided the solicitor is sufficiently up to date to deal with the case in a competent and timely manner.

Question 43

A solicitor is acting for a client in a personal injury claim. An important witness is reluctant to give evidence because the court is located several hours from the witness’s home. The solicitor promises the witness that if he gives evidence and the client’s claim is successful, the solicitor will reimburse him for his travel expenses. The witness consents in writing to this arrangement, but ultimately, he does not give evidence and no payment is made.

Did the solicitor breach the SRA Code of Conduct?

No, because a solicitor may offer to pay a witness’s travel expenses.

No, because the witness consented in writing to the arrangement.

Yes, because the offer was dependent on the outcome of the case.

No, because the solicitor did not make any payment to the witness.

Yes, because payments to witnesses and offers of payment are always prohibited

Answer 43

C) A solicitor must not provide or offer to provide any benefit to a witness if the benefit is dependent upon the nature of the evidence or the outcome of the case. (A) is incorrect. Although paying a witness’s legitimate travel expenses is not a breach, here the solicitor offered to make the payment if the client’s claim was successful. Thus, the offer was dependent on the outcome and was a breach of the Code of Conduct. (B) is incorrect because it is immaterial that the witness agreed in writing to the arrangement. (D) is incorrect because the offer itself was a breach, even if no payment was made to the witness. (E) is incorrect because it is too broad. Such offers and payments are only prohibited if dependent upon the nature of the evidence or the outcome of the case.

Question 44

A claimant is pursuing a case where no specific protocol applies. They are aware of their obligation to conduct their pre-action dealings with their opponent in accordance with the Practice Direction on Pre-Action Conduct and Protocols.

In accordance with the direction, they have written to their opponent with concise details of the claim, and their opponent has responded with a denial of liability, providing details of why they say the claim is not accepted.

What is the most appropriate next step that the parties should be considering, in line with the practice direction?

The claimant’s representative should contact the defendant’s representative for an initial discussion about the relative strengths of each party’s case.

The defendant should consider making an application for summary judgment.

The parties should disclose key documents relevant to the issues in dispute.

The claimant should send a copy of their witness statement to the defendant setting out the evidence in support of their case.

The parties should ask the court to nominate a suitable expert to provide a report to help the parties resolve the issues in dispute.

Answer 44

(C) The parties should disclose key documents relevant to the issues in dispute. Under the practice direction, the court expects the parties to be open and transparent. As part of this, they should each be disclosing any documents which the other party will reasonably expect to have disclosed to them. (A) is incorrect because there is no requirement under the practice direction for a specific discussion between the parties to attempt to narrow issues in the case. (B) is incorrect because it is too early for an application for summary judgment. A defendant cannot make an application for summary judgment until the claimant has served the Particulars of Claim and the defendant has served the acknowledgment or defence. (D) is incorrect because the claimant is not required to provide their witness statement to the proposed defendant at this stage in the claim. (E) is incorrect because it is up to the parties to agree the identity of an expert. The court will become involved only if a single joint expert were instructed and the parties are unable to agree on whom to instruct.

Question 45

A shareholder in a small company has a dispute with the company’s managing director regarding share allocation. The shareholder contends that there was an agreement to create additional shares in the company for allocation to the shareholder. The managing director denies the existence of this agreement.

The shareholder makes a pre-action request for the parties to engage in alternative dispute resolution (‘ADR’), which the managing director rejects out of hand. The managing director believes the gulf between their respective positions is too great for ADR to have any reasonable prospects of success. The shareholder decides to litigate, but their claim is unsuccessful.

Which of the following states the legal position with respect to the managing director’s refusal to engage in ADR?

Although the managing director was under a duty to participate in ADR, because they won, the issue has been rendered moot and they cannot be penalised by the court.

Although the managing director was not under a duty to participate in ADR, they were under a duty to set out their reasons. Having failed to do so, the court has discretion to penalise them with respect to legal costs.

Although the managing director was under a duty to consider ADR, they cannot be penalised with respect to costs as they won the case.

The managing director was under no duty to participate in ADR because they believed the prospects for success were low. Therefore, the court cannot penalise them.

Because the parties’ disputed whether or not an agreement exists, ADR was inappropriate in this case. Therefore, the managing director cannot be penalised with respect to costs.

Answer 45

(B) Although ADR is voluntary, it is encouraged. If one party requests ADR, the other party must state reasons for refusing. If they fail to do so (or if the court later finds the reasons to be unreasonable), the court has discretion to penalise the refusing party with respect to costs. (A) is incorrect in that participation in ADR is not required, although a party who refuses to participate without a valid reason can be penalised even if they ultimately win the lawsuit. (C) is incorrect for the same reason (that is, a party who refuses to participate without a valid reason can be penalised even if they ultimately win). (D) is incorrect because the mere belief that ADR is inappropriate would not insulate the managing director from penalty; they had to set out (reasonable) reasons. (E) is incorrect because the fact that parties dispute even crucial facts is not itself a valid reason for refusing to consideR

Question 46

A man owns a drone which he flies by remote control. On one occasion last month he deliberately flew the drone over the garden of his neighbour, skimming it just above his neighbour’s head. The drone caused no damage or injury of any kind. The drone carried a camera, but it was switched off, so no photographs were taken.

If the neighbour pursues a claim in tort against the man who flew the drone, which of the following statements is correct?

The neighbour’s claim should be for interference with privacy.

The man would have a defence to any claim in respect to the drone because the drone did not cause any damage.

The neighbour’s claim should be for nuisance.

The neighbour’s claim should be for trespass to land.

Flying a drone does not give rise to an established duty of care, and it would not be fair, just, and reasonable to impose a duty of care in this novel situation.

Answer 46

D) The neighbour’s claim should be for trespass to land. By flying the drone into the neighbour’s air space, the man has committed the tort of trespass to land. Land includes the airspace above, up to the height necessary for ordinary use of the land. The drone flew just above the neighbour’s head, so this is satisfied. Entry of the drone into the air space was intentional and direct, as is required for trespass. Trespass is actionable per se, so it does not matter that the drone did not cause any damage. (A) is not correct. There is no specific tort of interference with privacy. There is a tort of misuse of private information, but this is not applicable on the facts (the man did not acquire or use any information, as the camera was turned off). (B) is not correct. There could be a claim in trespass to land which is actionable per se, as discussed above. So, it would not be a defence to this claim that no damage was caused by the drone. (C) is not correct. The tort of nuisance does deal with interference with the use and enjoyment of land. However, it involves indirect interference and requires a continuing state of affairs, and the drone was flown over the land on one occasion only. (E) is not correct. An argument about duty of care would only be relevant in response to a claim in negligence. In this case, the claim in respect of the drone would be in trespass to land.

Question 47

A restaurant is making a breach of contract claim against the supplier of its professional oven. The limitation period is about to expire, and the restaurant is seeking advice about when time stops running for limitation purposes.

Which of the following is correct?

The limitation period stops on the date the claim form is sent to the court for issue.

The limitation period stops on the date the court issues the claim form.

The limitation period stops on the date of service of the claim form.

The limitation period stops on the date of deemed service of the claim form.

The limitation period stops on the date of deemed service of the Particulars of Claim if served separately from the claim form.

Answer 47

(B) The time for limitations purposes stops running when the claim form is issued by the court. (A) is incorrect because the court must actually issue the claim form for running of the limitation period to stop. (C) is incorrect. The limitation period stops before the claim form is actually served. (D) and (E) are not relevant for limitation purposes but govern when the defendant must respond to the proceedings

Question 48

A ship builder entered into a contract to build a cruise ship for a customer. They agreed to a price of £2,000,000. Shortly after the contract was signed, the pound was devalued significantly so the ship builder demanded an extra £200,000 to complete the build or they would terminate the contract. The customer did not want to pay the extra money, but they paid it because the ship builder threatened to terminate the contract, and because they already had a lucrative contract in place for the cruise ship.
Two years later the customer now wants to recover the extra £200,000. Will they be able to?

No. The customer has affirmed the contract by paying the money and taking no other action to avoid the contract.

No. Because of the currency devaluation the ship builder was entitled to request more money.

No. Both parties had provided additional consideration to support the promise to pay more money, as the customer was receiving a benefit because delivery of the ship would enable performance of their other contract.

Yes. The contract is void due to the economic duress of the ship builder.

Yes. Illegitimate pressure was applied by the ship builder so the customer can recover the extra money.

Answer 48

(A) Even though this appears to be a case of economic duress, by paying the money and also waiting two years to bring a claim, it is likely that the courts would find that the customer had affirmed the contract. (B) is incorrect because the price agreed was a term of the contract, and there is nothing in the scenario to suggest there was any clause that allowed a price adjustment for currency fluctuations. In the absence of such a clause, the ship builder would be expected to take the hit on the devaluation of the pound. While it is true that the customer’s ability to comply with the terms of its other contract could be seen as consideration to support the promise to pay more money, it is clear from the facts of the scenario that the additional money was obtained under duress, therefore (C) is incorrect. (D) is incorrect because duress renders a contract voidable at the option of the party subject to the duress, not void. (E) is incorrect because, whilst in this scenario there appears to have been illegitimate pressure, which is required to bring a claim for duress, the fact that the customer paid the money and then waited to bring a claim makes (A) the better answer because the customer is likely to be held to have affirmed the contract.

Question 49

A student lives with his parents in a house which they own. A company has opened a music venue in an old warehouse nearby. Everyone in the area is complaining about the noise, which carries on late into the night. The student has suffered from this in the same way as everyone else and would like to do something about it. He is considering bringing an action in tort against the company to seek an injunction.

When considering an action in tort by the student against the company, which of the following is correct?

The student could pursue successful claims in both public nuisance and private nuisance.

The student could pursue a successful claim in public nuisance but not in private nuisance.

The student could pursue a successful claim in private nuisance but not in public nuisance.

The student is more likely to have a successful claim in the tort of negligence than in nuisance.

The student is unlikely to have a successful claim leading to the grant of an injunction.

Answer 49

(E) The student is unlikely to be successful. The student could not pursue a successful claim in public nuisance because, although the noise appears to have affected a class of the public, he has not suffered particular damage over and above that suffered by the class in general. He cannot pursue a successful claim in private nuisance because he does not have a proprietary interest in the land affected by the noise (the house owned by his parents). Therefore, he is unlikely to have a successful claim leading to the grant of an injunction and (A) is not correct. (B) is not correct because the student cannot pursue a successful claim in public nuisance, as explained above. (C) is not correct because the student cannot pursue a successful claim in private nuisance since he does not have an interest in the land, as indicated above. (D) is not correct. The student cannot make a successful claim in the tort of negligence because intangible damage, such as interference with amenity caused by noise, does not amount to actionable damage in negligence.

Question 50

The House of Commons is debating a bill. Some of its provisions apply only to England.

Which of the following best explains the legislative process for these provisions?

The legislative process does not change from the legislative process for any other bill.

The legislative process is changed so that MPs representing Scottish constituencies have no role in voting on the bill.

The legislative process is changed so that the entire bill is debated only by MPs representing English constituencies.

The legislative process is changed by adding an extra stage at which MPs representing English constituencies vote on the provisions that apply only to England.

The legislative process is changed so that the Speaker of the House of Commons has the power to accept or reject the provisions that apply only to England.

Answer 50

(D) The legislative process is changed by adding an extra stage at which MPs representing English constituencies vote on the provisions that apply only to England. When provisions of a bill apply only to England, the process known as English Votes for English Laws applies. This means that between the Report Stage and the Third Reading, there is an extra stage of the legislative process during which MPs representing English constituencies can vote to approve or reject the provisions that apply only to England. If the provisions are approved, then the bill will progress to Third Reading. (A) is incorrect because, as previously described, the process does change here. (B) is incorrect because the MPs representing Scottish constituencies will be barred from voting on the provisions that apply only to England. They will not be prevented from voting on the other provisions of the bill. (C) is incorrect because the English Votes for English Laws stage will not prevent MPs from non-English constituencies from debating the bill. It will just prevent those MPs from voting on the England-only provisions. (E) is incorrect because the MPs representing the English constituencies, not the Speaker of the House of Commons, decide whether to approve the England-only provisions.