SQE 1 FLK1 MOCK Dec

Question 1

The directors of a private company plan to lend £19,000 to the company’s Sales Director. The Sales Director will use the loan to purchase a car for use when visiting existing and potential new customers of the company. The company’s directors are all also shareholders in the company. The company has adopted the Companies (Model Articles) Regulations 2008 (unamended) as its articles of association. The directors intend to authorise the giving of the loan at a board meeting. No other decisions will be made at the proposed meeting.

Can the directors authorise the giving of the loan at a board meeting without needing the approval of the shareholders?

A- No, because the company’s directors are all also shareholders in the company.

B- No, because the loan is for more than £10,000.

C- Yes, because the Sales Director is not allowed to count in the quorum and vote at the board meeting.

D- Yes, because the loan is for expenditure on company business.

E- Yes, because the Sales Director will declare their interest in the transaction at the board meeting.

Answer 1

Option D is correct.

Under s.197 of the Companies Act 2006 (CA), a company cannot make a loan to a director unless it has been approved by a resolution of the shareholders. However, there is an exception under s.204 CA for loans made for expenditure on company business, which amount to less than £50,000. As the loan is to purchase a car for use on company business, option D is therefore the correct answer.

Option A is wrong as the roles and powers of directors and shareholders are distinct, even if a person takes on both roles.

Option B is wrong. There is an exception to the need for shareholder approval under s.207 CA if the loan is for £10,000 or less, not £10,000 or more.

Options C and E are wrong as compliance with s.177 CA (duty to declare interest in proposed transaction) and Model Article 14 (director not taking part in conflict situations) has no bearing on compliance with s.197 CA.

Question 2

A solicitor is advising a client about the potential costs of bringing a civil claim against a firm of builders for the poor quality of painting and decorating work carried out for the client. The client’s household insurance policy does not cover the claim. However, the client has heard that it is not too late to take out insurance and gain some protection against having to pay the builders’ legal costs if the claim fails.

Which of the following best describes the advice that the solicitor should give to the client in respect of after the event insurance (ATE)?

A- Should the client’s claim fail, the ATE would cover the client’s own disbursements and any applicable builders’ legal costs. The ATE premium would not be recoverable from the builders.

B- Should the client’s claim fail, the ATE policy would cover any applicable builder’s legal costs, but not the client’s own disbursements, which the client will have to fund himself.

C- Should the client’s claim fail, the ATE policy would cover the client’s disbursements but the policy would not be permitted to cover more than 50% of any of the builders’ legal costs.

D- Should the client’s claim fail, the ATE would cover the client’s own disbursements but not liability for the builders’ legal costs.

E- Should the client’s claim fail, the ATE would cover the client’s own disbursements and any applicable builders’ legal costs. The ATE premium would be recoverable from the builders.

Answer 2

Option A is the correct answer because usually the ATE policy will cover the client’s liability for disbursements and the opponent’s costs. An ATE premium is never recoverable from the other side.

Option B is wrong because most ATE policies will cover the client’s liability for disbursements should the claim fail.

Option C is wrong because the law does not place a percentage cap on the protection which may be available through ATE.

Option D is wrong. ATE usually does cover liability for the opponent’s legal costs (as well as the client’s own disbursements).

Option E is wrong because ATE premiums are not recoverable from the other side in any event.

Question 3

An electrical fault on a defendant’s land caused a fire to break out. The defendant had been storing a large number of tyres on their land. The fire spread to these tyres. This fed the fire, which spread onto the claimant’s land and caused damage. The claimant now wishes to bring a claim under the rule in Rylands v Fletcher.

Can the claimant pursue a claim under the rule in Rylands v Fletcher?

A- No, because the rule requires a continuous and frequent interference rather than a single event.

B- No, because the tyres themselves did not escape onto a place outside the defendant’s occupation or control.

C- Yes, because the defendant fell below the standard of a reasonable neighbour of land.

D- Yes, because the defendant failed to take reasonable precautions to prevent a fire breaking out.

E- Yes, because the occupier of the land is liable for any damage caused as a result of the escape of something dangerous, irrespective of fault.

Answer 3

Option B is correct. The tort arises where a defendant brings onto their land for their own purpose something likely to do mischief, which then escapes. The thing brought onto the defendants’ premises was a large stock of tyres. The tyres themselves did not escape or cause mischief, the fire did.

Option A is wrong. The requirement for a continuous and frequent interference relates to private nuisance.

Option C is wrong, as this relates to negligence.

Option D is wrong, as this relates to negligence.

Option E is wrong. Whilst the rule in Rylands v Fletcher imposes strict liability, the elements of the tort still need to be made out. The elements of the tort are:
-the defendant brings onto their land for their own purposes something likely to do mischief;
-if it escapes;
-which represents a non-natural use of land; and
-it causes foreseeable damage of the relevant type.
In this case the thing brought onto the defendant’s land – the tyres – have not escaped.

Question 4

A private limited company incorporated in 2012 has adopted the Companies (Model Articles) Regulations 2008 (unamended) as its articles of association. It has one class of shares in issue and these are ordinary shares. The company wants to raise some more finance and has decided to do this by way of allotting more shares. The shares issued will be ordinary shares and preference shares.

Do the directors of the company have authority to allot these new shares?

A-Yes, because there are already ordinary shares in issue and they are allotting more ordinary shares.

B-Yes, because directors of a company automatically have authority to allot shares.

C-Yes, because the company’s articles give the directors authority to allot the shares.

D-No, because after the allotment there will be two classes of shares in issue, ordinary and preference shares.

E-No, because the shareholders will need to pass a special resolution to authorise the allotment.

Answer 4

Option D is correct because directors of a company incorporated with unamended Model Articles can only allot shares without shareholder authority if they are allotting shares of the same class and after the allotment there remains only one class of share (s550 Companies Act 2006 (CA 06)). Here the allotment is of ordinary and preference shares so authority under this section does not apply.

Option A is wrong because, whilst they are allotting ordinary shares, they are also allotting preference shares. This means the directors need to be given authority to allot by the shareholders. (ss550, 551 CA 06).

Option B is wrong because directors do not have general authority for all allotments (see reasoning for Options D and A above).

Option C is wrong because the Model Articles do not give directors authority to allot shares.

Option E is wrong because, whilst shareholders will need to be involved, the resolution required is an ordinary resolution not a special resolution (s551 CA 06).

Question 5

A solicitor acts for a claimant in a claim for breach of contract against a defendant. Following submissions from the solicitor, at the end of the trial the defendant is ordered to pay the claimant’s costs on the indemnity basis.

What approach will the court take when assessing the claimant’s costs?

A-The court will allow only those costs that were reasonably incurred by the claimant for a reasonable amount. The benefit of any doubt will be given to the defendant.

B-The court will allow only those costs that were reasonably incurred by the claimant for a reasonable amount. The benefit of any doubt will be given to the claimant.

C-The court will allow only those costs that were reasonably incurred by the claimant for a reasonable amount and that are proportionate to the matters in issue. The benefit of any doubt will be given to the defendant.

D-The court will allow only those costs that were reasonably incurred by the claimant for a reasonable amount and that are proportionate to the matters in issue. The benefit of any doubt will be given to the claimant.

E-The court will allow only those costs that were necessary for the claimant to incur for a proportionate amount. The benefit of any doubt will be given to the defendant.

Answer 5

Option B is the best answer. Whether it is assessing costs on the standard or indemnity basis, the court will not allow costs which have been unreasonably incurred or are unreasonable in amount. However, when assessing costs on the indemnity basis, the court does not consider if the costs are proportionate to the matters in issue. Moreover, the benefit of any doubt is given to the receiving party when costs are assessed on the indemnity basis. By way of information, CPR r 44.3(2) provides that where the amount of costs is to be assessed on the standard basis, the court will (a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; and (b) resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party. Rule 44.3(3) provides that where the amount of costs is to be assessed on the indemnity basis, the court will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party.

Option A is wrong. When costs are awarded on the indemnity basis, the court will resolve any doubt in favour of the receiving party and not the paying party. See the feedback to the correct option B.

Options C and D are wrong. When costs are awarded on the indemnity basis, the court does not consider if the costs are proportionate to the matters in issue. See the feedback to the correct option B.

Option E is wrong. The court will allow only those costs that were reasonably (not necessary) incurred by the claimant for a reasonable (not proportionate) amount. The benefit of any doubt will be given to the claimant. See the feedback to the correct option B.

Question 6

A man buys a dishwasher from a retailer and a plumber installs it in the kitchen in his house. Shortly after the dishwasher has been installed, the man switches it on and then goes out. On his return home, he finds the fire brigade in his flat. They have just extinguished a fire in his kitchen. The fire has caused extensive damage to his kitchen and his work laptop which was on his kitchen table. An expert report reveals that the fire was caused by faulty internal wiring inside the dishwasher. This would not have been visible from an external inspection. The man wishes to bring a claim in common law negligence for his losses.

Which of the following is the best explanation of the damages he can claim in negligence for his losses and against whom he can bring the claim?

A-He can claim against the retailer for the cost of the dishwasher, kitchen damage and work laptop. This is because they sold it to him and they were thus responsible for supplying a product that is of satisfactory quality.

B- He can claim against the retailer for the cost of the dishwasher, kitchen damage and work laptop. This is because they should have carried out an inspection of the dishwasher before selling it.

C-He can claim against the manufacturer for the cost of the dishwasher, the kitchen damage and work laptop. This is because he has suffered damage caused by a defect in a product.

D-He can claim against the manufacturer for the cost of the dishwasher, the kitchen damage and work laptop. The manufacturer owes the man a duty of care, they have fallen below the standard of a reasonable manufacturer and the faulty dishwasher caused the fire.

E-He can claim against the manufacturer for the kitchen damage and work laptop. The manufacturer owes the man a duty of care, they have fallen below the standard of a reasonable manufacturer and the faulty dishwasher caused the fire.

Answer 6

Option E is correct because negligence can provide compensation for property damage (even if business property) but does not provide compensation for pure economic loss, i.e. the cost of the product itself. For information on pure economic loss, see Murphy v Brentwood DC [1990] 2 All ER 908.

Option A is wrong because this would be a claim in contract.

Option B is wrong because on the facts, the internal fault would not have been visible from an external inspection. Also, the cost of the dishwasher could not be claimed in tort.

Option C is wrong because this describes a claim under the Consumer Protection Act 1987. However, a CPA claim does not compensate for damage to business property (the laptop) or for damage to the product itself (the dishwasher).

Option D is wrong because tort law does not provide for pure economic loss, i.e. the cost of the product itself.

Question 7

A client, who runs the local Creepy Crawlies Project, wishes to lead a march tomorrow through the town centre to protest the proposal to extend the Town Hall into the small park that lies beside it. The park is used by schoolchildren to catalogue the small creatures that live there. The protestors intend to occupy the park whilst the Council makes the final decision.

Does the client need to ask permission from the police beforehand?

A-The client must ask permission six days prior to the march through the town centre since it is a public place.

B-There is no requirement to ask permission of the police before leading a procession in a public place.

C-The client does not need to ask permission but cannot march into a public place without giving six days’ notice to the police.

D-The client must seek permission to occupy the park because it is used by children for educational purposes.

E-The client does not need permission because the march is to stop the destruction of a park which is used by children for educational purposes.

Answer 7

Option B is correct. There is no requirement to ask permission from the police to lead a public procession. The requirement is to give advance notice where reasonably practicable.

Option A is wrong because, although a protest march through the town centre is a public procession, there is no requirement to ask permission of the police six days in advance.

Option C is wrong because the notice period can be curtailed if it is not reasonably practicable to give the full six days’ notice.

Option D is wrong because permission is not required for a meeting in a park which is a public place.

Option E is wrong because, although the facts are correct, police permission is not required for any march.

Question 8

In its accounting period ending 31 March 2020 a company which manufactures supplies for the building trade has sales of £4,525,000. Its expenditure in the same accounting period is as follows:-

General overheads £500,000

Stock £1,100,000

Wages £795,000

New machinery £1,250,000

The written down value of the company’s pool of plant and machinery is £850,000 on 1 April 2019.

Assume that the company always claims the maximum capital allowances available.

Which of the following statements correctly states the company’s trading profit for its accounting period ending 31 March 2020?

A-The company’s trading profit for its accounting period ending 31 March 2020 is £1,932,000.

B-The company’s trading profit for its accounting period ending 31 March 2020 is £1,752,000.

C-The company’s trading profit for its accounting period ending 31 March 2020 is £1,977,000.

D-The company’s trading profit for its accounting period ending 31 March 2020 is £727,000.

E-The company’s trading profit for its accounting period ending 31 March 2020 is £932,000.

Answer 8

Option E is calculated correctly.

The constituent elements of the calculation can be summarised as follows:

The chargeable receipts are the sales = £4.525 million
The deductible expenses are the aggregate of the overheads, stock and wages = £2.395 million
The annual investment allowance of £1 million will be deducted from the cost of the new equipment
The writing down allowance of 18% will be applied against the remaining value of the plant and machinery = £850,000 + £250,000 x 0.18 = £198,000
So the trading profits are: £4,525,000 - £2,395,000 – (£1,000,000 + £198,000) = £932,000

Option A is wrong because the annual investment allowance of £1,000,000 for the expenditure on the new machinery has not been deducted in calculating trading profits.

Option B is wrong because a deduction of 18% of the cost of the whole of the new expenditure on the machinery has been used in calculating trading profits.

Question 9

A solicitor acts for a claimant who has obtained a money judgment against the defendant (an individual) in the High Court for the sum of £105,000. The amount of the judgment remains unpaid.

An information hearing has taken place which has revealed the defendant has the following assets: £100,000 savings in a current account which is in the joint names of him and his wife, a salary of £75,000 paid to him monthly by his employer and £10,000 savings in a savings account which is in his sole name.

Which of the following statements best describes the enforcement action the solicitor should recommend to the claimant?

A-Apply to the High Court for an attachment of earnings order to obtain payment of the sum due as well as applying for a third party debt order over the two bank accounts.

B-Apply to the County Court for an attachment of earnings order to obtain payment of the sum due as well as applying for a third party debt order over the two bank accounts.

C-Apply to the County Court for an attachment of earnings order to obtain payment of the sum due.

D-Apply for a third party debt order against the £10,000 in the defendant’s sole savings account first and then consider applying to the County Court for an attachment of earnings order.

E-Apply for a third party debt order against the £10,000 in the defendant’s sole savings account.

Answer 9

Option D is the best answer. A third party debt order (TPDO) can be obtained against the £10,000 in the defendant’s sole savings account. If successful, this would obtain £10,000 of the sum due but then it would be worth applying for an attachment of earnings order for the remaining balance of £95,000. It would take a significant time for the outstanding balance to be repaid under such an order and although there would be a fee involved it would be worth considering as the outstanding balance is substantial.

Option A is not the best answer because the attachment of earnings order would need to be obtained in the County Court (not the High Court). In addition, a TPDO could not be obtained over the current account as such orders cannot be made over joint accounts (as it is only the defendant who is the debtor and not his wife).

Option B is not the best answer because although an attachment of earnings order could be obtained, a TPDO could not be obtained against the current account for the reasons explained with reference to Option A above.

Option C is not the best answer as, although obtaining an attachment of earnings order is a possible step, it is not the best option to do this exclusively as a TPDO could be used to secure payment of £10,000. On its own, an attachment of earnings order will take a significant amount of time to repay the sum due.

Option E is not the best answer as, although a TPDO is a possible step, an attachment of earnings order could be used to recover the remainder due even though it will take a significant amount of time to do so.

Question 10

The seller of a business told the prospective buyer that the business had made profits of £100,000 each year for the last three years. The seller told the buyer that it could check the business’ accounts. The buyer asked its accountant to do this. The accountant confirmed that the profit figure was correct. Three months later the contract for the sale of the business was agreed. The buyer has now discovered that although the gross profits (before deduction of expenses) had been £100,000, the net profits (after deduction of expenses) had only been £60,000 each year for the last three years.

Does the buyer have a claim for misrepresentation against the seller?

A- Yes, because the statement was a half-truth which the buyer relied on.

B-Yes, because the buyer’s accountant confirmed the statement to be true.

C-No, because the statement was true.

D-No, because the buyer relied on its own accountant not on the seller.

E-No, because the statement was made three months before the contract was agreed.

Answer 10

No, because the statement was made three months before the contract was agreed.

Question 11

A solicitor is advising a new client about bringing a claim for damages for breach of a building contract. The client asks about funding the claim through a damages based agreement (DBA). She asks her solicitor how they would be paid for the work completed on the case should the claim be successful.

What of the following statements is the best advice to give to the client regarding the DBA?

A- The client would have to pay the solicitor’s normal charges together with a success fee of up to 100% of the damages ultimately received.

B-The client would have to pay the solicitor an agreed percentage of the damages received up to a maximum of 50%. Credit would be given to the client for costs ordered to be paid by her opponent.

C-The client would have to pay the solicitor’s normal charges together with a success fee of up to 50% of the damages ultimately received.

D-The client would have to pay to her solicitor an agreed percentage of the damages ultimately received up to a maximum of 35%. Credit would be given to the client for costs ordered to be paid by her opponent.

E-The client would have to pay to her solicitor an agreed percentage of the damages received up to a maximum of 50%. The solicitor would also be entitled to retain any costs ordered to be paid by the client’s opponent.

Answer 11

Option B is correct because the DBA must not provide for a payment above an amount which, including VAT, is equal to 50% of the sums ultimately recovered by the client.

Option A is wrong. This option combines elements of a DBA with a conditional fee agreement (CFA). No part of the DBA contingency fee is calculated as a percentage of the solicitor’s normal charges. In addition, the cap on a DBA contingency fee is 50% rather than 100%.

Option C is wrong. This option combines elements of a DBA with a conditional fee agreement (CFA). No part of the DBA contingency fee is calculated as a percentage of the solicitor’s normal charges.

Option D is wrong. The cap for a DBA contingency fee is 50% rather than 35%. The suggested cap is applicable to employment contracts. The claim in this case relates to a building contract.

Option E is wrong. The client should be given credit for any costs ordered to be paid by her opponent.

Question 12

A solicitor acts for a defendant in a contractual dispute. Shortly after the filing of the defendant’s defence, the claimant’s solicitor sends a Part 36 Offer indicating that the claimant will accept £50,000 inclusive of interest in settlement of the claim. The offer is not accepted.

What costs order will the court make?

A- The court will order the defendant to pay the claimant’s costs on the standard basis up to the last day of the relevant period of the claimant’s Part 36 offer but will order the claimant to pay the defendant’s costs on the standard basis from then on.

B- The court will order the defendant to pay the claimant’s costs on the standard basis.

C-The court will order the defendant to pay the claimant’s costs on the indemnity basis.

D-The court will order the defendant to pay the claimant’s costs on the standard basis up to the last day of the relevant period of the claimant’s Part 36 offer and pay the claimant’s costs on the indemnity basis from then on.

E-The court will not make a costs order.

Answer 12

Option B is the best answer. By way of information, CPR r 44.2(2)(a) provides that the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party. Payment is on the standard basis. The claimant is the successful party, having established liability and been awarded damages by the court. The claimant’s Part 36 offer has no effect as the judgment against the defendant (£40,000 inclusive of interest) is less advantageous to the claimant than the proposals contained in the claimant’s Part 36 offer (£50,000 inclusive of interest).

Option A is wrong. It could only apply if the defendant had made a Part 36 offer and the claimant had failed to obtain a judgment more advantageous than that defendant’s Part 36 offer. By way of information, see r 36.17(1)(a) and (3).

Option C is wrong. There is nothing on the facts which suggests costs should be paid by the defendant on the indemnity basis. You should recall that costs on the indemnity basis are awarded as a penalty, usually to reflect the court’s displeasure with the manner in which a party has behaved either pre-action and/or during proceedings. See the feedback to the correct option B, as well as the incorrect option D.

Option D is wrong. As explained in the feedback to the correct option B, the claimant’s Part 36 offer has no effect. Therefore, the court will not make the order described in this option under r 36.17(4)(b).

Option E is wrong. There is nothing on the facts to suggest that the court will not order the defendant to pay the claimant’s costs. See the feedback to the correct option B.

Question 13

A solicitor is acting for a company in relation to its purchase of one of its suppliers. The supplier has several offices, factories and warehouses across the UK. Three years ago, the solicitor acted for another client that also considered purchasing the supplier but then decided not to after discovering significant health and safety concerns in the factories, including asbestos. These concerns were shared with the solicitor at the time.

Can the solicitor inform her new client about the asbestos and other health and safety concerns?

A- Yes, because she an obligation to act in the best interest of her new client.

B-Yes, because there is no conflict of interest between her new client and her former client.

C-Yes, because health and safety concerns override any client confidentiality rules.

D-No, because her duty of confidentiality to the former client remains.

E-No, because she must act in the best interest of her former client.

Answer 13

Option D is correct. The solicitor’s duty of confidentiality towards her former client remains (see paragraph 6.3 of the Code of Conduct), and therefore the information cannot be disclosed to her new client.

Option A is wrong because while a duty to act in the best interest of her new client does exist, this duty cannot override a duty of confidentiality to a former client.

Options B and C are wrong because a duty of confidentiality remains to the former client, irrespective of whether a conflict does not exist or if health and safety concerns exist (there is nothing in the facts to suggest that disclosure is required by law).

Option E is not the best answer. The principle 7 requirement to act in the best interests of each client is a duty that exists during the course of a retainer. By contrast, the duty of confidentiality exists even after the retainer has come to an end.

Question 14

A bank made a loan of £2,000,000 to a company last year. The loan is secured by a standard form security debenture, comprising a legal mortgage on the company’s premises, a fixed charge on the fixed assets used to run its business and a floating charge over all its undertaking and assets. The company still owes the bank £1,400,000. The security is duly registered. The company has failed to repay the latest instalment of the loan which is £300,000. The company has told the bank that it does not know when it will be able to pay the bank and that the company’s unsecured creditors are threatening to put it into compulsory liquidation. As the majority creditor of the company, the bank would like to take action which does not bring the company’s operations to an end but will limit the company’s other creditors from being able to do so.

Which of the following statements best describes the action the bank can take as a result of the non-payment?

A- Appoint a receiver to sell assets subject to the legal mortgage and fixed charge.

B-To force through a Company Voluntary Arrangement on the basis of its voting power as a majority creditor of the company.

C-Appoint an administrator over the company and its assets.

D-Apply to the court for the company to be wound up, on the ground that the company is unable to pay its debts.

E-Enter into a formal arrangement with the company to give the company more time to repay the scheduled loan repayments.

Answer 14

Option C is the correct answer because, as the debenture is in standard form, the bank should be able to appoint an administrator out of court; an enforcement event has arisen and the debenture would meet the requirements of Insolvency Act 1986, Schedule B1 Paragraph 14. One of the aims of administration is to save the company as a going concern and creates a statutory moratorium over the company and its assets during the administration.

Option A is wrong because the appointment of a receiver would mean that the company would no longer have the assets needed to carry on its business, resulting in a winding up, something the bank wishes to avoid.

Option B is wrong because, although a CVA is a mechanism to help rescue a company in financial difficulty and requires the support of secured creditors, secured creditors are not usually allowed to vote on the CVA proposals.

Option D is wrong because the bank does not want the company’s operations brought to an end, which would be the effect of such a compulsory liquidation.

Option E is wrong because a rescheduling of the loan would be a contractual arrangement between the company and the bank which would not bind the company’s other creditors. The arrangement might achieve the bank’s desire not to bring the company’s operations to an end, but would not prevent other creditors from seeking to have the company wound up on the ground that the company is unable to pay its debts.

Question 15

A client was injured when he helped his sister to remove the packaging from a new washing machine which she had purchased. He cut his hand badly on a sharp splinter of plastic which broke away from the packaging. The washing machine manufacturer has produced evidence to show that there is a known risk of this happening, but no practicable way to check every package. The washing machine manufacturer’s packaging procedures meet the highest industry standards.

Which of the following best describes the client’s legal position in respect of his injury?

A- The client cannot claim for his injury because there was no practicable way for the washing machine manufacturer to check every package.

B-The client cannot claim for his injury because he did not buy the washing machine.

C-The client cannot claim for his injury because he is not a foreseeable victim.

D-The client can claim for his injury because the washing machine manufacturer breached its duty of care as this was a known risk and the harm caused was foreseeable and not too remote.

E-The client can claim for his injury because the washing machine was defective.

Answer 15

Option E is the best answer because the client will not have a claim in contract or in negligence, but he may have a claim under the Consumer Protection Act 1987. The washing machine (which will include its packaging) is a defective product for the purposes of the CPA 1987, as it is not safe according to what consumers generally are entitled to expect (s.3 CPA 1987).

Option A is wrong because this would only preclude a claim in negligence. Liability under the CPA is strict, so it is irrelevant that the manufacturer had taken all reasonable care.

Option B is wrong because this would only preclude a claim in contract. The CPA allows ‘anyone who has suffered damage caused by a defect in a product’ to make a claim (s.2 CPA 1987).

Option C is wrong because the CPA allows ‘anyone who has suffered damage caused by a defect in a product’ to make a claim. In any event, the client is likely to be a foreseeable victim for the purpose of a claim in negligence.

Option D is wrong because on the facts it seems that the manufacturer has taken all reasonable care, thus precluding a claim in negligence.

Question 16

A client manufactures plastic sacks for the storage of grain. The sacks are required to be airtight and watertight to ensure that bacteria do not grow within them. A local farmer has brought a High Court claim against the client, alleging that moisture has seeped into some sacks that the farmer purchased from the client.

The client’s solicitor appoints an expert to provide evidence for the court proceedings. Before producing their written report, the expert telephones the solicitor and says that in his opinion the sacks are airtight and watertight but new research suggests the type of plastic used in the sacks may not withstand all moisture. The expert advises the solicitor that he intends to make reference to this new research in his report.

Should the solicitor ask the expert not to include the new research in their written report?

A- Yes, because it will be in the best interests of the client for the expert to leave the new research out of the written report.

B-No, because the solicitor must not seek to influence the expert’s opinion

C-Yes, because the proper administration of justice does not require the inclusion of new research.

D-Yes, because the solicitor should act to protect the integrity of the client.

E-No, because an expert’s duty is only to the court and not the client.

Answer 16

Option B is the best answer. A solicitor should not seek to influence the substance of evidence, including generating false evidence or persuading witnesses to change their evidence (paragraph 2.2 of the SRA Code of Conduct for Solicitors, RELS and RFLs).

Option A is wrong. Although it might superficially seem that suppressing harmful evidence would be in the best interests of the client (SRA Principle 7), to do so as described would carry a significant risk of damaging the credibility of both expert and client were it to emerge that this had been done (see the feedback to the correct Option B), or if the opponent knew of and referred to the new research. It would not, therefore, be in the client’s best interests.

Option C is wrong. As noted in the feedback to the correct Option B, it would be improper to interfere with the expert’s evidence, and the proper administration of justice (SRA Principle 1) will not work as an overriding argument on the facts given that suppressing the research would potentially deprive the court of important and relevant information.

Option D is wrong. “Integrity” forms a part of the SRA Principles in that a solicitor should act with it (SRA Principle 5). Suppressing the new research and by so doing contravening other parts of the SRA Principles and the SRA Code of Conduct for Solicitors, RELS and RFLs will not meet this Principle. See the feedback to the correct option B.

Option E is not the best answer. An expert owes their client a duty of reasonable care and skill (in both tort and contract) in carrying out their services. But an expert owes an overriding duty to the court to help it on matters within their expertise (CPR rule 35.3(1)(2)).

Question 17

During the tax year a man who is a higher rate tax payer:

Buys an investment property for £100,000. Five years later he sells the property for £150,000 (‘Transaction 1’)
Buys an investment property for £100,000. Five years later he gives the property to his daughter as a 21st birthday present. At the time of the gift the property is worth £150,000 (‘Transaction 2’)
Buys a factory for £300,000. The client runs a business from the factory. Ten years later he sells the factory for £350,000 (‘Transaction 3’)
Buys shares for £300,000. Ten years later the client dies and the shares pass to his son under the terms of his will. At the time of the client’s death the shares are worth £350,000 (‘Transaction 4’)
Buys a painting worth £10,000 and swaps it a year later for a different painting worth £12,000 (‘Transaction 5’)

Which of the above is a disposal for Capital Gains Tax (CGT) purposes?

A- All of the transactions, except for Transaction 1.

B-All of the transactions, except for Transaction 2.

C-All of the transactions, except for Transaction 3.

D-All of the transactions, except for Transaction 4.

E-All of the transactions, except for Transaction 5.

Answer 17

Option D is the correct answer. Death is not a disposal for CGT purposes - in fact all the gains that an individual has made on the assets they own when they die are wiped out on death. Their assets pass on to their beneficiaries without there being any CGT liability and the beneficiary acquires the asset at its value at the date of death.

Option A is wrong. Selling the property attracts CGT because a profit has been made. A sale of the investment property is a disposal for CGT proposes.

Option B is wrong. A gift is a disposal for CGT purposes. So even though the man’s daughter has not received any money, she is nevertheless taxed on the increase in the value of the property during the client’s period of ownership.

Option C is wrong. As the man is a sole trader in option C, he is an individual and so subject to CGT on the gain made on the sale of the factory. A disposal of the factory is a disposal for CGT purposes, regardless of whether the client ran his business from the premises.

Option E is wrong. Disposing of an asset includes: selling it, giving it away as a gift, or transferring it to someone else, or swapping it for something else.

Question 18

A-

B-

C-

D-

E-

Question 19

A client is unhappy with his previous solicitors. The previous solicitors acted for the client in a civil claim for breach of contract in which the client was successful. The previous solicitors state that the client must pay to them a 125% success fee under the terms of a conditional fee agreement (CFA), which the client accepts he entered into before the start of the proceedings.

Which of the following statements provides the best advice to give to the client about this demand for payment of a success fee?

A- The previous solicitors are entitled to the 125% success fee and the client should pay it because the claim was successful.

B-The success fee cannot exceed 100% of the solicitors’ normal charges. So, the client should agree to pay just a 100% success fee to the previous solicitors.

C-The success fee cannot exceed 25% of the solicitors’ normal charges. So, the client should agree to pay just a 25% success fee to the previous solicitors.

D-The success fee cannot exceed 100% of the solicitors’ normal charges. In setting a success fee of 125%, the CFA is invalid. The client should refuse to pay the success fee.

E-The success fee cannot exceed 25% of the solicitors’ normal charges. In setting a success fee above 25%, the CFA is invalid. The client should refuse to pay the success fee.

Answer 19

Option D is correct, because the success fee cannot exceed 100% of the solicitor’s normal charges. The CFA is therefore invalid.

Option A is wrong. The success fee cannot exceed 100%. If it does, then the CFA will be invalid and the solicitor will not be able to recover the success fee.

Option B is also wrong. The CFA is invalid and so the client is not required to pay any success fee.

Option C is wrong. A success fee may be set at up to 100%, not 25%. In personal injury claims, there is an additional cap of 25% of general damages recovered. The 25% cap is additional, rather than an alternative, to the 100% success fee limit. In any event, the client’s claim is not for damages for personal injury. It is a claim for damages for breach of contract.

Option E is wrong. The success fee cannot exceed 100% rather than 25%

Question 20

A customer attends a restaurant for lunch. She is desperate to find out the recipe for the pudding she ordered and so goes into the restaurant kitchen to ask the chef. As she goes into the kitchen, she passes a large sign on the kitchen door which says “No customers past this point. Staff members should ensure their belongings are stored in the lockers rather than left in the kitchen. The management accepts no liability for any loss or damage”.

On entering the kitchen, she slips on some cooking oil which has been knocked onto the floor, breaks her arm and tears her expensive jacket.

Which of the following statements correctly states the legal position in relation to the customer’s injuries and damage?

A- The restaurant will be able to exclude liability for the torn jacket if the notice meets the requirements of reasonableness.

B-The restaurant owes the customer the common duty of care and this has been breached as the customer was not reasonably safe

C-The warning notice will not prevent the restaurant being in breach of duty as it is not specific and so does not enable the customer to be reasonably safe.

D-The restaurant will not be liable to the customer in respect of the torn jacket.

E-The restaurant will not be liable to the customer as the warning notice was sufficiently prominent.

Answer 20

Option D is the correct answer because the customer exceeds her permission to be on the premises and so is owed a duty under Occupiers’ Liability Act (OLA) 1984 only. This excludes damage to the trespasser’s property.

Option A is wrong as it is not possible to claim for property damage under the OLA 1984 Act in any event.

Option B is wrong because the customer is not a visitor when she is injured and damages her property. If she were a visitor, the common duty of care is a duty to take such care as in all the circumstances of the case is reasonable to see that she will be reasonably safe. However, under s 1(4) OLA 1984 the duty is to take such care as is reasonable in all the circumstances of the case to see that she does not suffer injury on the premises by reason of the danger concerned.

Option C is wrong because the notice is not warning of any danger and so does not fulfil the requirements of s1(5) OLA 1984 whereby the duty may be discharged by taking such steps as are reasonable in all the circumstances of the case to give warning of the danger concerned.

Option E is wrong as the notice is not a warning but a limitation on permission.

Question 21

A solicitor acts for a claimant in a multi-track case which is due to go to trial next month. During the solicitor’s conversation with the claimant about the trial process, the claimant asks the solicitor who will be responsible for preparing the trial bundle and when the trial bundle needs to be prepared by.

What advice should the solicitor give to the claimant?

A- The solicitor should advise the claimant that, unless the court orders otherwise, the claimant’s solicitor will prepare and file the trial bundle not more than 14 days and not less than 3 days before the start of the trial.

B-The solicitor should advise the claimant that, unless the court orders otherwise, the defendant’s solicitor should prepare and file the trial bundle not more than 14 days and not less than 3 days before the start of the trial.

C-The solicitor should advise the claimant that, unless the court orders otherwise, each party’s solicitor should prepare and file their own bundle not more than 7 days and not less than 3 days before the start of the trial.

D-The solicitor should advise the claimant that, unless the court orders otherwise, the claimant’s solicitor will prepare and file the trial bundle not more than 7 days and not less than 3 days before the start of the trial.

E-The solicitor should advise the claimant that, unless the court orders otherwise, the defendant’s solicitor should prepare and file the trial bundle not more than 7 days and not less than 3 days before the start of the trial.

Answer 21

Option D is correct making all the other options wrong.

By way of information, CPR r 39.5 provides that unless the court orders otherwise, the claimant must file the trial bundle not more than 7 days and not less than 3 days before the start of the trial. Further note that PD 32 para 27.7 provides that the preparation and production of the trial bundle, even where it is delegated to another person, is the responsibility of the legal representative who has conduct of the claim on behalf of the claimant. If the claimant is unrepresented, the court may direct that another party must prepare and produce the trial bundle. Also note that PD 32 para 27.12 states that the contents of the trial bundle should be agreed where possible. Where it is not possible to agree the contents of the bundle, a summary of the points on which the parties are unable to agree should be included.

Question 22

In order to promote high quality market standards, a local authority has been given statutory power to grant licences to market traders in their area. The authority formulates a policy that licences will only be granted to traders who have been trading for at least two years. A trader who began a new business three months ago applies for a licence and is refused. The trader is not offered an oral hearing to present his case. The local authority’s decision letter states that the trader’s application has been refused because he has not been trading for two years and because the products the trader wishes to sell are not sustainable.

Which of the following best describes whether the trader has grounds for judicial review?

A- The trader has grounds for judicial review on the basis that the local authority has made an error of law.

B-The trader has grounds for judicial review on the basis that there has been no fair hearing.

C-The trader has grounds for judicial review on the basis of duality of purpose.

D-The trader has no grounds for judicial review.

E-The trader has grounds for judicial review on the basis of irrationality.

Answer 22

Option C is correct because the local authority has taken into account two purposes, one of which is consistent with the statutory purpose (the two year trading requirement) and one of which is not (the lack of sustainable products).

Option A is wrong because there is no error of law since the local authority has not misinterpreted the statute.

Option B is wrong because, as a mere applicant, there is no requirement to offer the trader an oral hearing.

Option D is wrong because the trader does have grounds under duality of purpose.

Option E is wrong because the decision does not meet the high threshold for irrationality. It would not be considered so unreasonable that no local authority could come to that decision or outrageous in its defiance of logic.

Question 23

A client operates an electrical installation business supplying and fitting electrical systems for new build residential housing. The client completed work for a house builder last week pursuant to a supply and fit contract. The builder is unhappy with the work. The builder has explained that the electrical wiring supplied by the client does not satisfy UK safety standards and has caused damage to plastic trunking which will cost £25,000 to repair. The client has admitted that the wiring was substandard (and supplied in breach of contract), but has referred the builder to its standard conditions of contract which state:

“The maximum liability which [the client] assumes for any loss of profit caused by the breach of any express or implied term of this agreement is limited to £10,000.”

Which of the following statements provides the best advice for the client about the clause?

A- The clause will be enforceable and the client will only have to pay a maximum of £10,000 to the builder.

B-The clause will be unenforceable as statute provides that contracts of this nature cannot exclude or restrict liability for breach of contract.

C-The clause will be wholly unenforceable as it is unclear and ambiguous.

D-The clause will not be effective in limiting the client’s liability for the physical damage caused.

E-The clause is arguably ambiguous as to the type of loss in respect of which the client’s liability is limited and will therefore be construed against the builder who is making the claim for breach of contract.

Answer 23

Option D is the best answer. The clause purports to limit liability should the builder suffer any loss of profit. However, the builder’s claim will not be for loss of profit, but will be for the cost of curing the physical damage caused to the plastic trunking. The wording of the clause therefore does not limit liability for the type of loss that has been sustained, and the builder may therefore be able to recover damages in excess of the clause.

Option A is wrong. The clause may be enforceable but only in respect of claims for loss of profit. As the builder will be seeking damages in respect of property damage, the clause will not limit the client’s liability to £10,000.

Option B is wrong. This is a business-to-business contract and is therefore governed by the Unfair Contract Terms Act 1977. The limitation clause will be valid if reasonable. (This should be contrasted with the position set out in the Consumer Rights Act 2015 under which liability for breach cannot be excluded or limited.)

Option C is wrong. The clause is unlikely to be treated by the courts as being ambiguous. Even if this were the case, this would not render the clause wholly unenforceable, but would rather result in the court interpreting the extent and applicability of the clause against the client seeking to rely on it. Option E therefore is also wrong – if the clause is ambiguous, that ambiguity will be resolved against the client, not against the builder.

Question 24

A shareholder owns shares in a private company limited by shares. The company has Model Articles.

The shareholder wants to sell his shares to a purchaser. The company has recently released its annual accounts and it has performed well in the last financial year. The shareholder paid £2.70 each for 10,000 shares two years ago. The shareholder now expects that the purchaser will pay £3.44 for each share.

The company is looking to raise funds for its new factory.

Which of the following options best describes the likely role of the company in this process?

A- Once the transaction completes, the company will be able to use the £7,400 towards its new factory.

B-When allotting these shares to the purchaser, the directors of the company must check for constitutional restrictions, the directors’ authority to allot and pre-emption rights before they allot the shares.

C-The directors of the company will register the transfer of shares unless they exercise their discretion not to. If they decide not to, they must inform the transferee within two months.

D-The company’s directors must decide carefully if the company wishes to use the money to buy back the shares or to invest in the new factory. The directors must consider their statutory duties.

E-The company cannot buy back the shares unless there are profits available for the purpose.

Answer 24

Option C is correct and conforms to the duties set out for transfer of shares (s771 of the Companies Act 2006). A company must register the transfer of shares as soon as practicable and, as a long stop, within two months of the transfer being lodged with the company. However, the board of directors have the discretion to refuse to register the transfer of shares.

Option A, D and E are wrong because this is a transfer of shares not a buyback or an allotment. The company will not receive or spend any money themselves. The money will move from the purchaser to the shareholder.

Option B is wrong because these rules relate to an allotment of shares and this is a transfer.

Question 25

A claimant has obtained a judgment in the High Court for damages against a defendant following a trial, but the amount of the judgment remains unpaid. Enforcement action has been taken by the claimant, but the High Court Master has refused to grant a charging order over the defendant’s beneficial interest in land owned jointly with her husband. The claimant is unhappy with the outcome and wishes to appeal the decision of the Master.

Which of the following statements best describes the approach that would apply to the claimant’s appeal?

A- The claimant will have an automatic right of appeal to a High Court judge.

B-The claimant must apply to the Court of Appeal for permission to appeal.

C-The claimant has 28 days to appeal the Master’s decision.

D-Permission to appeal will only be granted if there is a compelling reason why the appeal should be heard.

E-The claimant’s appeal will be heard by a High Court judge.

Answer 25

Option E is the best answer. The order was made by a Master of the High Court and so any appeal will be heard by the next level of judge which, in this case, is a High Court judge.

Option A is not the best answer. There is no automatic right of appeal in civil cases as permission is always required from either the court that made the decision (the ‘lower court’) or the court that will hear any appeal (the ‘appeal court’). It is correct that any appeal of the Master’s decision would be heard by a High Court judge.

Option B is wrong because permission can be obtained either from the court that made the decision (the ‘lower court’) or from the court that will hear any appeal (the ‘appeal court’). On these facts, a High Court Master made the decision and any appeal will be heard by a High Court judge. By way of information, CPR rule 52.3 governs permission to appeal.

Option C is wrong because the claimant has 21 days to appeal against a High Court decision. By way of information, this time limit is set out in CPR rule 52.12.

Option D is wrong because there are two grounds on which permission to appeal may be granted in this situation, the other being that the court considers that the appeal would have a real prospect of success. By way of information, the relevant test for permission to appeal is set out at CPR rule 52.6.

Question 26

Two weeks ago, a woman’s business lender successfully petitioned for her bankruptcy. The woman and her daughter have expensive tastes which led to substantial debt.

The woman wants advice about which of her assets will vest in the trustee in bankruptcy and the effect of bankruptcy on her wish to set up another business imminently.

She gives you the following information:

her trustee in bankruptcy has already taken control of her car rental business assets (mainly leased) and is now looking to take possession of her other assets including her house, her clothing and an antique silver tea set she recently inherited.
in addition to her car rental business she is also a partner in a wedding planner business, which provides her with a reasonable income. She confirms there is no partnership agreement.
to boost her income she intends to set up another business for which she will need a small loan of £400. In passing she says she will use a new trade name so that her customers would be unaware of her bankruptcy.

Which of the following best represents the woman’s position during her bankruptcy?

A- The woman will be entitled to obtain the loan from a willing lender.

B-The woman will have a continuing right of occupation in her main residence.

C-The woman is free to use a new trading name for her start-up without restriction.

D-The woman will continue to receive her partnership income.

E- The woman is entitled to retain her clothing and the antique silver tea set which she recently inherited.

Answer 26

Option A is correct – an undischarged bankrupt can obtain a loan of less than £500 (s306 Insolvency Act 1986).

Option B is wrong because her main residence will vest in the Trustee in Bankruptcy after one year of the bankruptcy s355A IA 1986.

Option C is wrong. If a new trading name is used she would need to disclose the bankruptcy; s360 IA 1986.

Option D is wrong. The partnership will automatically dissolve under s33 PA 1890.

Option E is wrong. She will be able to keep assets needed for day-to-day living, so probably the clothes, but the tea set is likely to be of high value and the trustee in bankruptcy could sell it and replace it with a cheaper alternative.

Question 27

A supplier contracts to sell to a buyer for £15,000 a consignment of goods for onward sale to the buyer’s customers. On the afternoon of the day before the agreed delivery date, the supplier contacts the buyer and, on the basis that economic conditions have deteriorated since the contract was made, demands a further £2,500 before it will supply the goods. The buyer threatens to call in its lawyers, but agrees to the increase in price. The supplier delivered the goods, the buyer fulfilled its contracts with its customers and the supplier is now demanding payment of the full £17,500.

Does the buyer have an arguable defence of economic duress to the supplier’s claim for payment of the extra £2,500?

A- Yes, because all necessary elements of the defence are likely to be satisfied operating to render the original contract void so that the supplier cannot recover the £17,500.

B-No, because the buyer could have sought and would have obtained an interim mandatory injunction to compel the supplier to deliver the goods under the original contract.

C-No, because the agreement to pay the increased price was supported by consideration.

D-Yes, because all necessary elements of the defence are likely to be satisfied operating to render the agreement to pay the increased price voidable even if supported by consideration.

E-No, because the buyer’s inability to return the contract goods to the supplier would bar rescission for economic duress.

Answer 27

Option D is correct. The requirements for economic duress appear to be satisfied – a threat by the supplier to break the contract; no practical alternative for the buyer; protest by the buyer at the time; and the threat clearly induced the buyer to agree to pay the extra (Carillion Construction Ltd. v Felix).

Option A is wrong because the original contract is unaffected by any finding of duress, so the initially agreed £15,000 remains payable.

Option B is wrong because, even if an application was feasible in the time available, the grant of an injunction is a discretionary remedy and there is no guarantee that it would have been granted (Adam Opel v Mitras).

Option C is wrong because, even if there is consideration for the agreement to pay the extra, the agreement is voidable for economic duress.

Option E is wrong because the inability to return the goods does not relate to the agreement to pay the extra, but rather to the original supply contract. The remedy of rescission is relevant only to the later agreement to pay the extra sum.

Question 28

A client runs a small cheese making company in the UK. Their cheese contains 0.2% calcium chloride from milk. A food inspector serves the client with an Ingredient Declaration Rectification Order (fictitious) under the Food Inspectorate Act 2017 (fictitious). The Act states that no cheese should be made with more than 0.18% calcium chloride. The client is ordered to change their recipe.

The client has found the EU Dairy Produce Regulation of 2019 (fictitious) which state that cheeses are considered safe if they contain anything up to 0.25% calcium chloride from milk. All food safety EU regulations have been retained.

Which of the following best describes whether the client will be able to defend their cheese recipe?

A- The client will not be able to defend their recipe. The relevant Order was made pursuant to a UK statute and Parliament is sovereign in the UK legal system.

B-The client will not be able to defend their recipe. The EU Regulation is no longer binding in the UK since IP completion day.

C-The client will not be able to defend their recipe. The EU Regulation has become invalid since IP completion day.

D-The client will be able to defend their recipe. The EU Regulation is retained law, the UK statute is pre-IP completion day and so the EU Regulation remains supreme.

E-The client will be able to defend their recipe. 0.18% calcium chloride is so close to 0.2% that the difference does not matter.

Answer 28

Option D is correct. EU law which is retained by the European Union (Withdrawal) Act 2018 remains supreme over UK laws which were created before the IP completion date.

Options A and B are wrong because both answers disregard the fact that the EU Regulation has been retained.

Option C is wrong because the EU Regulation is still valid within the EU. The UK exit from the EU had no effect on laws within the EU. The terminology used in this option is inaccurate and misleading.

Option E is not the best answer. If UK law was supreme in this area, then the fact that the difference in calcium chloride values is slight would not give the client the ability to defend its cheese recipe. However, the calcium chloride value is below the maximum allowed by EU law, the relevant instrument of which has been retained by the European Union (Withdrawal) Act 2018. This should allow the client to defend its recipe.

Question 29

A private limited company has adopted the Companies (Model Articles) Regulations 2008 (unamended) as its articles of association. It has five directors who are also all shareholders. Three of the directors, who together own 78% of the voting shares in the company, want to remove one of the others from his position as director. They have already provided special notice to the company and informed the director of their intention to pass a resolution to remove him.

What steps should the three directors take next to remove the director?

A- They should call a board meeting to pass a board resolution to remove the director.

B-They should call a board meeting to resolve to call a general meeting and then at the general meeting pass the ordinary resolution required for removal of a director.

C-They should call a board meeting to resolve to circulate a written resolution and then circulate a written resolution to pass the ordinary resolution required for removal of a director.

D-They should call a board meeting to resolve to call a general meeting and then at the general meeting pass the special resolution required for removal of a director.

E-They should requisition a general meeting and then at the general meeting pass the special resolution required for removal of a director.

Answer 29

Option B is correct because the three directors are able to call a board meeting and have the simple majority required to pass a board resolution to call a general meeting. Then an ordinary resolution of the members passed at a general meeting is required to remove a director (s168 Companies Act 2006 (CA06)). They also have the required simple majority shareholding to pass this resolution.

Option A is wrong because an ordinary resolution of the members is required to remove a director (see above). The company’s articles make no provision for the directors to remove a director and therefore a board resolution will not suffice.

Option C is wrong because the ordinary resolution has to be passed at a general meeting and cannot be passed by way of the written resolution procedure.

Option D is wrong because an ordinary resolution is required to remove a director, not a special resolution (s168 CA06).

Option E is wrong because the three directors (in their capacity as shareholders) do not need to requisition a general meeting; they can call one as directors at a board meeting as they form a simple majority of the directors. In addition, an ordinary resolution is required to remove the director and not a special resolution.