TOPIC 9: Trusts and Fiduciary Obligations Flashcards
In the law of trusts, the `settlor`: originally owns the property which is to be settled in the trust. is the person who sets up the trust. All of the above are true. may be a trustee.
All of the above are true
Which of the following is INCORRECT?
A fiduciary can be sued regardless of whether there was a loss suffered by the beneficiary.
A fiduciary is not allowed to profit from a commercial opportunity acquired through his position, regardless of whether the beneficiary is in a position to take advantage of the situation
A fiduciary can only be sued if it is established that there was an intent to defraud the beneficiary.
None of these options are incorrect.
A fiduciary can only be sued if it is established that there was an intent to defraud the beneficiary.
A `Chinese wall` is: a cause of action. a defence. a statutory obligation. illegal in New Zealand. illegal in New Zealand and the United Kingdom.
A defence
In relation to trusts, select the correct statement:
A trust is a combination of an equitable obligation and a property right recognised in equity.
All trusts are created by court order.
All of the above are true.
A trust is an obligation based on a contract between the trustee/trustees and the beneficiary/beneficiaries.
A trust is a combination of an equitable obligation and a property right recognised in equity.
In relation to fiduciary law, it is correct to say:
the law of fiduciary obligations is a central part of equity.
liability may be avoided in a conflict of interest situation if there is full disclosure of all material facts and agreement to the conflict.
All of the above are correct.
fiduciary duties will vary depending on the type of fiduciary relationship.
All of the above are correct.
Sarah, who was a wealthy business woman, had a run of bad luck and owes creditors a large amount of money. She lives in a large house in Auckland and the creditors believe that if she is declared bankrupt the house can be sold to repay her debts. The house, however, is in a family trust. Which of the following is correct?
The house cannot be sold because it is in a family trust (the fact that Sarah transferred the house to the trust 9 months ago is irrelevant).
The house can be sold because Sarah is a beneficiary of the trust and thus benefits through living in the house.
The house can be sold because Sarah is the trustee of the trust and her name is listed as the legal owner of the trust.
The house may be able to be sold as Sarah transferred the house to the trust 9 months ago when she realised she was in financial trouble.
The house may be able to be sold as Sarah transferred the house to the trust 9 months ago when she realised she was in financial trouble.
Fiduciary relationships are characterised as ones exhibiting trust and confidence in another person and vulnerability to that other person’s actions. Which of the following relationships traditionally give rise to fiduciary duties?
Company directors to shareholders in the company as the shareholder is so directly affected financially by the actions of the directors.
Banker to client because the client entrusts the bank with their money.
Employer to employee because of the vulnerability of the employee as a wage earner.
Partners to each other.
Partners to each other
In respect of legal and equitable interests:
a beneficiary has legal ownership.
All of the above are true.
the trustee has an equitable interest.
both legal and equitable interests can be held in the same property at the same time.
both legal and equitable interests can be held in the same property at the same time.
Commonly, fiduciary relationships are owed by:
accountants, to their clients.
company directors, to the shareholders.
employers, to their employees.
All of the above.
Accountants, to their clients
Fiduciary relationships are basically characterised by:
All of the above.
dedication to the interests of the principal in accordance with the provisions of the Fiduciary Obligations Act 1923.
a recognition that both parties are essentially on an equal footing in their dealings with each other, but with one being more wealthy than the other.
trust and confidence in one party by another who is in a vulnerable position.
trust and confidence in one party by another who is in a vulnerable position.
Where a trust is a `testamentary trust` (that is, a trust set up in a person`s will) the settlor is referred to as: the testator. the beneficiary. the third party. the agent. None of the above.
The testator
Which of the following relationships are traditionally regarded as fiduciary in nature? All of the above. Trustees to beneficiaries. Directors to companies. Agents to principals.
All of the above
An inter vivos trust:
is created by writing (namely a trust deed).
comes into effect while the settlor is alive.
All of the above are true.
is distinguished from a testamentary trust which comes into effect upon the death of the person who set up the trust.
All of the above are true
Fiduciary relationships are generally owed by:
politicians, to the electorate.
None of the above (Options 1 to 3) are fiduciary relationships.
the police, to the public.
All of the above (Options 1 to 3) are fiduciary relationships.
retailers, to customers.
None of the above (Options 1 to 3) are fiduciary relationships.
A Chinese wall is used primarily to:
prevent defamatory information being spread about the fiduciary.
protect the fiduciary’s personal security.
prevent the flow of confidential information to competitors, who might misuse that information.
prevent defamatory information being spread about the principal.
protect the principal`s personal security.
prevent the flow of confidential information from one part of an organisation to another.
prevent the flow of confidential information from one part of an organisation to another.
