TRUSTS Flashcards
True or False: A trustee can apply trust property exclusively for their own benefit.
False
True
False
A trustee is under a duty to apply trust property for the benefit of the beneficiaries.
A CREST member is the registered owner of 100,000 shares in BT Group plc. It holds 50,000 of those shares for a broker. The broker acquired its interest in the 50,000 shares on behalf of a private investor.
Which one of the following statements is a correct description of the private investor’s position in relation to the 50,000 shares?
The investor is the legal owner of the shares.
The investor has a legal and equitable interest in the shares.
The investor does not have any interest in the shares.
The investor has an equitable interest in the shares but not the beneficial interest.
The investor has an equitable and beneficial interest in the shares.
The investor has an equitable and beneficial interest in the shares.
The CREST member is the legal owner of the shares. The broker has an equitable interest in the shares but no beneficial interest. The investor has an equitable and beneficial interest in the shares.
A trustee holds £50,000 on trust for a beneficiary. The trustee misapplies £10,000 of the trust money and gifts it to the local priest. The priest does not know that the £10,000 is trust money. The trustee misapplies another £10,000 of the trust money and purchases a car with the money. The seller knows that the money paid by the trustee is misapplied trust money. The trustee is made bankrupt.
Which one of the following statements is a correct description of the beneficiary’s rights?
The beneficiary does not have an equitable proprietary interest in the £30,000 held by the trustee, in the £10,000 given to the priest, or in the £10,000 paid to the seller.
The beneficiary has an equitable proprietary interest in the £30,000 held by the trustee, in the £10,000 given to the priest, and in the £10,000 paid to the purchaser.
The equitable proprietary interest which the beneficiary has in any assets held by the trustee will be subordinated to the claims of the trustee’s creditors.
The beneficiary has an equitable proprietary interest in the £30,000 held by the trustee but not in the £10,000 given to the priest or the £10,000 paid to the purchaser.
The beneficiary has an equitable proprietary interest in the £30,000 held by the trustee and in the £10,000 given to the priest, but not in the £10,000 paid to the purchaser.
The beneficiary has an equitable proprietary interest in the £30,000 held by the trustee, in the £10,000 given to the priest, and in the £10,000 paid to the purchaser.
The beneficiary of a trust has an equitable proprietary interest in the trust property which can be enforced against everyone except a purchaser of a legal interest who does not have notice of the trust. The priest is not a purchaser. The seller has notice of the trust.
True or False: The full legal owner of an asset has an equitable interest in the asset.
False
True
False
The full legal owner of an asset has only a legal interest in the asset.
A man holds shares on trust for a beneficiary. He is also the bailee of some goods. His house is subject to a legal charge and an equitable charge in favour of two of his creditors. He also has a number of unsecured creditors. The man is made bankrupt.
Who is likely to be most prejudicially affected by the man’s bankruptcy?
The bailor of the goods.
The legal chargee.
The equitable chargee.
The beneficiary of the trust.
The unsecured creditors.
The unsecured creditors.
An unsecured creditor has a personal right against their debtor. Unlike property rights, personal rights do not enjoy ‘priority’ in the event of the debtor’s bankruptcy.
A bailor has a legal proprietary interest in the bailed goods. Generally, legal proprietary interests can be enforced against everyone. A beneficiary of a trust has an equitable proprietary interest in the trust property. Equitable proprietary interests can be enforced against everyone except a purchaser of a legal interest without notice.
A woman holds shares on trust for a beneficiary. She is also the bailee of some goods. In breach of her duties to the beneficiary and to the bailor, the woman sells the shares and the goods (for their full market value). The purchaser believes that the woman is the full legal owner of the shares and the goods.
Which one of the following statements is a correct description of the beneficiary’s and the bailor’s position in relation to the purchaser?
The beneficiary cannot recover the shares from the purchaser and the bailor cannot recover the goods from the purchaser.
The beneficiary can recover the shares from the purchaser but the bailor cannot recover the goods from the purchaser
The bailor can recover the goods from the purchaser and the beneficiary can recover the shares from the purchaser.
The bailor can recover the goods from the purchaser but the beneficiary cannot recover the shares from the purchaser.
The purchaser is an agent for the beneficiary and the bailor.
The bailor can recover the goods from the purchaser but the beneficiary cannot recover the shares from the purchaser.
True or false: A settlor can be the beneficiary of a trust they create
False
True
True
A settlor can become the beneficiary of a trust over property which they previously held as full legal owner. One way of doing this is to transfer property on trust to a third party trustee to hold on trust for the settlor.
By his valid will, the testator made the following dispositions:
‘1. I give £10,000 to my solicitor to be applied for the benefit of my mother.
I give £10,000 to my wife absolutely, confident that she will do right by our children.’
The executors of the testator’s will have paid £10,000 to his widow and £10,000 to his solicitor.
Which one of the following statements is correct?
The solicitor and the widow are the full legal owners of the money.
The solicitor holds the money on trust for the testator’s mother. The widow holds the money on trust for the testator’s children.
The widow holds the money on trust for the testator’s children. The solicitor is the full legal owner of the money.
The solicitor and the widow are the equitable owners of the money.
The solicitor holds the money on trust for the testator’s mother. The widow is the full legal owner of the money.
The solicitor holds the money on trust for the testator’s mother. The widow is the full legal owner of the money.
The testator has imposed a duty on the solicitor: the money is ‘to be’ applied for the testator’s mother. But the testator has not imposed a duty on the widow: the words ‘confident that she will’ are not imperative.
True or false: Certainty of intention requires the settlor to understand that they are creating a trust.
True
False
False
Revisit your materials on Paul v Constance. The settlor does not even need to know what a trust is as long as their intention is consistent with the intention to create a the relationship which is characteristic of a trust.
True or false: Only land and chattels can be held on trust.
True
False
False
Correct
Almost every asset and right can be held on trust. What was the subject matter of the trust in Hunter v Moss [1994] 1 WLR 452?
The owner of 20 ordinary shares in a private company and 20 bars of gold bullion orally declares herself a trustee of 10 of the shares and 10 of the bars for a beneficiary. She does not segregate or otherwise identify the 10 shares or the 10 bars which are to form the subject matter of the trust.
Which one of the following statements best describes the effect of the declaration?
There is a valid trust of 10 shares and 20 bars.
There is a valid trust of 10 bars but no trust in respect of the shares.
There is a valid trust of 10 shares but no trust in respect of the bars.
There is a valid trust of 10 shares and 10 bars.
Neither the shares nor the bars are subject to a trust.
There is a valid trust of 10 shares but no trust in respect of the bars.
A person can declare a trust of x shares out of a larger number of such shares without identifying which x shares are to form the subject matter of the trust, provided that they are all shares of the same type and in the same company: Hunter v Moss [1994] 1 WLR 452. However, there is not a trust of any of the bullion because a person cannot declare a trust of x physical items out of a larger number of such items without identifying the particular x items which are to form the subject matter of the trust: In re Goldcorp [1995] 1 AC 74.
By his valid will, the testator (deceased) made the following disposition:
‘I give to my trustees my favourite car on trust for my daughter, and the sum credited to my current bank account on trust to give most of it to my daughter and the balance to my son.’
There is no available evidence of which car was the testator’s favourite.
Which one of the following statements best describes the effect of the disposition?
The testator has created a valid trust of his favourite car but has not created a valid trust of the sum credited to his bank account.
The testator has not created a valid trust.
The testator has created a valid trust of his favourite car and of the sum credited to his bank account.
The testator has created a valid trust of the sum credited to his bank account but has not created a valid trust of a car.
The trustees are entitled to full legal ownership of a car and of the sum credited to the testator’s bank account.
The testator has not created a valid trust.
The intended trust of the car is void because it is not possible to identify which car was the testator’s favourite. The intended trust of the sum credited to the bank account is void because it is not possible to identify the beneficiaries’ beneficial entitlements – ‘most’ is too vague.
A company transfers possession of its goods, but not its title to them, to a man. The company and the man agree that the man will try to sell the goods on behalf of the company and that he will return to the company any goods that he is unable to sell. They also agree that the man will pay the proceeds from any sales into a separate bank account and that he will transfer the sum credited to that account to the company at the end of each week. The man sells some of the goods. He pays the proceeds of sale into a separate bank account.
Which statement best describes the man’s relationship with the company?
The man is a bailee, an agent and a trustee for the company.
The man is a trustee for the company.
The man’s relationship with the company is not fiduciary in nature: it is merely contractual.
The man is a bailee for the company.
The man is an agent for the company.
The man is a bailee, an agent and a trustee for the company.
The man has possession of (but not title to) the company’s goods. This creates the relation of bailor and bailee. The man is authorised to sell goods on behalf of the company. This creates the relation of principal and agent. The man has paid the proceeds of sales into a separate bank account, which he must transfer to the company. This creates the relation of trustee and beneficiary.
A man borrows £10,000 from a woman. They agree that the money can only be used by the man to renovate his house and for no other purpose. The man spends £5,000 of the money renovating his house and he gifts the remaining £5,000 to his son. The man’s son still has the £5,000.
Which statement best describes the woman’s rights?
The woman does not have any claims against the man or the son.
The woman has an equitable proprietary claim to the £5,000 held by the son.
The woman has an equitable proprietary claim to the £5,000 held by the son and an unsecured personal claim against the man.
The woman has an equitable proprietary claim to the £5,000 which was spent on the renovation works.
The woman has an unsecured personal claim against the man.
The woman has an equitable proprietary claim to the £5,000 held by the son and an unsecured personal claim against the man.
Since the man could only use the £10,000 to renovate his house, he held it on trust for the woman but had a power to apply it for the renovation works. The gift to the son was a breach of trust. Since the son provided no value for the £5,000, the woman can assert her equitable proprietary interest against him.
By his valid will, the testator made the following disposition: ‘I give £10,000 to my trustees to be distributed between my children and my friends in such shares as my trustees shall determine.’ The executors of the testator’s will have paid £10,000 to the trustees.
Which one of the following describes the trustees’ position in relation to the £10,000?
The trustees hold the money on a resulting trust for the testator’s estate.
The trustees may keep the money for their own benefit.
The trustees must distribute the money amongst the testator’s children.
The trustees must distribute the money amongst the testator’s children and friends.
The trustees must distribute the money amongst the testator’s friends.
The trustees hold the money on a resulting trust for the testator’s estate.
The discretionary trust is void for uncertainty due to the inclusion of a conceptually uncertain term (‘friends’) in the description of the class of objects. As a result, the trustees hold the money on resulting trust for the testator’s estate.
True or false: Evidential uncertainty in connection with the objects of a trust is fatal to all types of trust.
False
True
False
Although evidential uncertainty is fatal to some trusts – e.g. fixed trusts involving equal distribution amongst the members of a class – it is not fatal to all trusts: Re Baden’s Deed Trusts (No 2) [1973] Ch 9.
By his valid will, the testator made the following disposition: ‘I give £10,000 to my trustees. £5,000 is to be distributed to my children, and £5,000 is to be distributed to British men, in such shares as my trustees shall determine.’ The executors of the testator’s will have paid £10,000 to the trustees.
Which one of the following describes the trustees’ position in relation to the £10,000?
The trustees hold £5,000 on discretionary trust for the testator’s children. They may keep the other £5,000 for their own benefit.
The trustees hold £5,000 on discretionary trust for the testator’s children and £5,000 on discretionary trust for British men.
The trustees hold £10,000 on resulting trust for the testator’s estate.
The trustees hold £5,000 on discretionary trust for British men and £5,000 on resulting trust for the testator’s estate.
The trustees hold £5,000 on discretionary trust for the testator’s children and £5,000 on resulting trust for the testator’s estate.
The trustees hold £5,000 on discretionary trust for the testator’s children and £5,000 on resulting trust for the testator’s estate.
The discretionary trust for the children is valid but the discretionary trust for British men is void for administrative unworkability, because the class of objects is too large. As a result, the trustees hold £5,000 on resulting trust for the testator’s estate.
True or false: The trustees of a fixed trust have a distributive discretion.
False
True
False
The trustees of a fixed trust have no discretion in relation to the distribution of the trust property. They must distribute as directed by the settlor.
True or false: The objects of a discretionary trust have proprietary rights in the trust property.
False
True
False
The objects of a discretionary trust are only potential beneficiaries. They have no equitable interest in the trust property until the discretion is exercised in their favour.
A trustee holds property on trust for the settlor’s wife for life, remainder to the settlor’s daughter.
Match the beneficiaries with the description of their beneficial entitlement.
Wife: Entitled to income immediately
Daughter: Entitled to capital when life interest ceases
The wife has an interest in the income during her lifetime but no interest in the capital. The daughter has an interest in the capital but is only entitled to this once the wife’s life interest ceases (i.e. the wife dies). The daughter’s interest is not contingent. If the daughter dies before the wife, the capital passes to the daughter’s estate on the wife’s death.
Match the arrangements with their description.
My trustees must hold the trust fund for my children in equal shares. During the trust period, my trustees may pay any or all of the trust fund to such of my wife and children as they see fit.
fiduciary power (coupled with a trust)
My trustees must hold the trust fund for my children in equal shares.
fixed trust
My trustees must distribute the trust fund between such of my children as my wife may determine within 12 months of my death and, if no such determination is made, in equal shares.
personal power (coupled with a trust)
My trustees must distribute the trust fund between such of my children as they, in their absolute discretion, determine.
discretionary trust
A trustee holds property on trust for A for life, remainder to the first of B and C to get married and, if neither marries, to charity.
Which one of the following is correct:
A’s interest is vested in possession. B and C’s interests are contingent.
A’s interest is vested in interest. B and C’s interests are contingent.
A, B and C’s interests are all vested in possession.
A’s interest is vested in possession. B and C’s interests are vested in interest.
A, B and C’s interests are all vested in interest.
A’s interest is vested in possession. B and C’s interests are contingent.
A has a vested interest in the income. Each of B and C has a contingent interest in the capital. They must marry before the other for their interest to vest. It is not guaranteed that either will do so, hence the gift-over.
A trustee holds property on trust for A for life, remainder to B (age 18) and C (age 16). A, B and C (all of whom are of sound mind) wish to use the rule in Saunders v Vautier to collapse the trust and divide the property equally between them.
Which one of the following is correct:
A cannot exercise Saunders v Vautier because they do not have a right to the capital. B and C must wait until A dies before they can collapse the trust.
A, B and C cannot collapse the trust until C reaches the age of 18.
A and B can take their shares of the trust property now. C must wait until they reach the age of 18.
A, B and C can collapse the trust and share the property equally now.
A can exercise Saunders v Vautier immediately because their interest is vested in possession. B and C cannot exercise Saunders v Vautier until their interests vest in possession.
A, B and C cannot collapse the trust until C reaches the age of 18.
C is not yet an adult so cannot exercise Saunders v Vautier rights. Due to the nature of the trust, it is not possible to sever A and B’s shares.
True or false: Saunders v Vautier rights can only ever be exercised by beneficiaries with indefeasible, vested interests.
True
False
False
There are other situations where it is possible to exercise Saunders v Vautier rights but it is necessary for agreement between all the beneficiaries.
True or false: Trustees must provide beneficiaries with reasons for the way they have exercised their powers.
True
False
False
Trustees have no obligation to provide reasons for the exercise of their powers.
A trustee holds a trust fund on trust for A for life, remainder to B and C in equal shares. The trustee is considering how to invest the trust fund.
What should the trustee be trying to achieve from their investment strategy?
Capital growth only
Income and capital growth
Income only
Income and capital growth
The trustee must attempt to strike a fair balance between the life tenant who is entitled to the income and the remaindermen who are entitled to the capital.
Which of the following is a dispositive power of trustees?
Power to charge trust property
Power to sell trust property
Power of delegation
Power of investment
Power of appointment
Power of appointment
A power of appointment involves making a decision as to the distribution of property. This is a dispositive power.
A trustee of a life interest trust decides that they will invest £500,000 of trust money in a property for the life tenant to live in. The trustee decides to buy a property in the north of France, where the life tenant is currently living. The trust instrument does not contain any express provisions relating to the acquisition of land.
True or false: The trustee has acted in breach of trust.
False
True
True
The land is abroad and therefore is not an authorised investment. See section 8 Trustee Act 2000.
A trust fund is worth £500,000. It has two trustees, who are both property lawyers. The trustees decide to invest £50,000 of trust money in company shares. They discuss the matter together and decide to make the investment. The trust instrument does not contain any express provisions relating to investment.
Which ONE of the following best describes the position?
The trustees have breached their statutory duties because they have not obtained proper advice with regards to the investment.
The trustees have breached their statutory duties because they have not diversified their investments
The trustees have breached their statutory duties because company shares are not a suitable investment for this trust fund.
The trustees have not breached their statutory duties because they have a statutory power to invest in company shares.
The trustees have breached their statutory duties because they do not have the power to make this kind of investment.
The trustees have breached their statutory duties because they have not obtained proper advice with regards to the investment.
The trustees are required to take proper advice in accordance with section 5 Trustee Act 2000 unless they reasonably consider it unnecessary to do so in the circumstances. There is nothing in the fact pattern that suggests that this is an investment where it would not be necessary to take advice.
Which of the following powers are trustees permitted to delegate using their statutory powers of delegation?
Powers of investment and powers to acquire land
Powers to distribute property to trust beneficiaries only
Powers to acquire land and powers to distribute trust property to beneficiaries
Powers of investment only
Powers of investment and powers to distribute trust property to beneficiaries
Powers of investment and powers to acquire land
Trustees can delegate their powers of investment and powers to acquire land but cannot delegate their powers to distribute property to a beneficiary.
Ten years ago, a trustee used money from a trust fund to purchase a house for themselves. The beneficiary has only just discovered the breach.
True or false: The beneficiary cannot recover the trust property because the limitation period has expired
False
True
False
This would be a proprietary claim (for the trust property itself), rather than a personal one and therefore would not be subject to the limitation rules. This may also be considered a fraudulent act.
A trust has three trustees. One of the trustees is a solicitor, another a doctor and the third is an accountant.
The solicitor is a director of the company in which the trust has a significant shareholding. The solicitor has not attended board meetings for some time and, as a result, was unaware of a number of poor business decisions which were made by the board. The value of the company shares has decreased significantly as a result of these decisions.
The company accounts have been circulated to the three trustees on an annual basis. It has been very clear from the accounts that the company has been in financial difficulties for several years and that the share value has been decreasing year on year. The trustees have not taken any action to try and improve the position of the company or sell the shares.
Which of the trustees is likely to be found liable for breach of trust?
Only the solicitor and accountant
Only the solicitor
All three trustees
Only the accountant
None of the trustees
All three trustees
This is the most likely outcome. All the trustees have failed to properly monitor the investment in the company shares. Although the solicitor may appear more culpable than the others (and the accountant could be expected to have a better understanding of the accounts) none of them has exercised the requisite standard of care and skill in respect of this investment. All had access to the accounts and should have reviewed them.
A trustee holds a fund on trust for A for life, remainder to B (18) and C(12). A wants the trustee to purchase land in Spain for A to live in. The trust instrument does not give the trustee the power to acquire land overseas.
Which of the following represents the best advice to the trustee?
The trustee can purchase the land in Spain as long as they obtain the fully informed consent of A and B. C’s consent is not needed because they are a minor.
The trustee can purchase the land in Spain as they have A’s consent. B and C’s consent are not needed because their interests have not yet vested in possession.
The trustee can purchase the land in Spain as long as they obtain proper advice and are confident it is a suitable acquisition which is in the interests of all the beneficiaries. Although purchasing the land is unauthorised, the trustee should not worry about this as they will only be liable to compensate the trust fund if the breach causes a loss.
The trustee should not purchase the land in Spain. It is not permitted by the terms of the trust and obtaining A’s consent is insufficient to prevent the trustee being liable for breach of trust.
The trustee can purchase the land in Spain as long as they obtain the fully informed consent of all three beneficiaries.
The trustee should not purchase the land in Spain. It is not permitted by the terms of the trust and obtaining A’s consent is insufficient to prevent the trustee being liable for breach of trust.
This is an unauthorised investment and would require the fully informed consent of all beneficiaries. C cannot consent.
A woman recently died. Her valid will contains the following clauses:
I give £50,000 to my trustees to be distributed between my children in equal shares.
I give £50,000 to my trustees to be distributed between such of my children and in such proportions as my wife may determine and, if no such direction is made within five years of my death, to the homelessness charity Shelter.
Which one of the following statements best describes the effect of the provisions in clauses 1 and 2?
Clauses 1 and 2 are both fixed trusts.
Clause 1 is a fixed trust. Clause 2 is a discretionary trust.
Clauses 1 and 2 are both discretionary trusts.
Clause 1 is a fixed trust. Clause 2 is a fixed trust with a power of appointment exercisable by the woman’s wife.
Clause 1 is a discretionary trust. Clause 2 is a fixed trust with a power of appointment exercisable by the woman’s wife.
Clause 1 is a fixed trust. Clause 2 is a fixed trust with a power of appointment exercisable by the woman’s wife.
By the terms of a trust the trustee is instructed to pay the trust income to a man during his lifetime and, after the man’s death, to transfer the trust capital to a woman if she reaches the age of 25. The man is alive. The woman is aged 21.
Which statement best describes the nature of the man’s and the woman’s rights?
The man and the woman have contingent interests.
The man and the woman together have the right to terminate the trust.
The man has an interest in possession and the woman has a contingent interest in remainder.
The man and the woman have interests in remainder.
The man and the woman have interests in possession.
The man has an interest in possession and the woman has a contingent interest in remainder.
The man has an immediate right to income. The woman’s interest is contingent because she is only entitled to the capital if she reaches the age of 25. Her interest is in remainder because she is only entitled to the capital after the man dies.
A woman is the trustee of two trusts, Trust A and Trust B. The beneficiaries of Trust A are all capable adults with vested interests. Trust B has adult and child beneficiaries.
Which statement best describes the beneficiaries’ rights?
The beneficiaries of Trust A can terminate their trust. The beneficiaries of Trust B can terminate their trust but only if the trustee agrees
The beneficiaries of Trust A can terminate their trust. The beneficiaries of Trust B cannot terminate their trust.
The beneficiaries of Trust B can terminate their trust. The beneficiaries of Trust A cannot terminate their trust.
The beneficiaries of Trust A and Trust B can terminate their respective trusts.
The beneficiaries of Trust A and Trust B cannot terminate their respective trusts.
The beneficiaries of Trust A can terminate their trust. The beneficiaries of Trust B cannot terminate their trust.
Beneficiaries can agree to terminate a trust if they are all capable adults who exhaust all possible claims to the trust property. The beneficiaries of Trust A satisfy these conditions but the beneficiaries of Trust B do not.
By a valid will, a testator made the following disposition: “I give £10,000 to my wife absolutely, confident that she will do right by our children.” The testator’s executors have paid £10,000 to the widow.
Which one of the following statements best describes the widow’s rights in relation to the £10,000?
The widow holds the money on a discretionary trust for the children.
The widow has a fiduciary power to appoint the money amongst the children.
The widow is the full legal owner of the money.
The widow holds the money on a fixed trust for the children.
The widow has a personal power to appoint the money amongst the children.
The widow is the full legal owner of the money.
This provision is most likely to be interpreted as an outright gift to the wife. There is no evidence she is intended to be a trustee. She is therefore the full legal owner of the money and can do with it as she chooses. (As full legal owner she, of course, has the power to pay it to the children but this does not mean she has a power of appointment )
A woman recently died. By her valid will she gave £500,000 to trustees to hold on trust for her husband for life with remainder to such of their children and in such shares as her husband may select during his lifetime or by his will and, in default of selection, to such of their children who are living on the date of her husband’s death.
Which statement best describes the husband’s position?
He has a power in relation to the trust capital.
He has a duty to appoint the trust capital.
He is entitled to the trust income during his lifetime.
His rights will be determined by the trustees.
He is entitled to the trust income during his lifetime and has a power in relation to the trust capital.
He is entitled to the trust income during his lifetime and has a power in relation to the trust capital.
A woman recently died. Her valid will contains the following clauses:
‘1. I give £10,000 to my trustees to be distributed amongst my children in such shares as my trustees shall determine.
I give £10,000 to my trustees to pay an ample sum to my brother.’
Which statement best describes the status of the trusts in clauses 1 and 2?
The trustees can determine whether the trusts are valid or void.
The trusts in clauses 1 and 2 are void.
The trust in clause 2 is valid but the trust in clause 1 is void.
The trusts in clauses 1 and 2 are valid.
The trust in clause 1 is valid but the trust in clause 2 is void.
The trust in clause 1 is valid but the trust in clause 2 is void.
Certainty of subject matter comprises two requirements. The second requirement is the beneficial entitlement requirement: it must be possible to ascertain the nature and extent of the beneficiary’s interest in the trust property. In relation to clause 1, it is possible to ascertain the extent of each beneficiary’s interest by reference to the trustees’ determination. However, in relation to clause 2, it is not possible to ascertain the extent of each beneficiary’s interest because ‘ample sum’ is an uncertain measure. (How much is an ‘ample sum’?) As a result, the trust in clause 2 is void for uncertainty of subject matter.
A woman declares a trust of three of her five paintings, and 100 of her 200 ordinary shares in a private company, in favour of a man. The woman does not segregate or otherwise identify the three paintings or the 100 shares to be held on trust.
Which statement best describes the effect of the woman’s declaration?
The woman holds 100 shares on trust for the beneficiary. She remains the full legal owner of the other 100 shares. She holds the paintings on a resulting trust for herself.
The woman holds 100 shares and three paintings on trust for the man. She remains the full legal owner of the other 100 shares and two paintings.
The woman does not hold any shares or paintings on trust for the man. She remains the full legal owner of all the shares and paintings.
The woman holds 100 shares on trust for the man. She remains the full legal owner of the other 100 shares and all the paintings.
The woman holds three paintings on trust for the man. She remains the full legal owner of the other two paintings and all the shares.
The woman holds 100 shares on trust for the man. She remains the full legal owner of the other 100 shares and all the paintings.
Certainty of subject matter comprises two requirements. The first requirement is the trust property requirement: it must be possible to identify the trust property. The woman has failed to identify the three paintings to be held on trust and, as a result, it is not possible to identify the trust property. By contrast, the woman’s failure to identify the 100 shares to be held on trust is not fatal because a person can declare a valid trust of x of their (x+y) shares of the same type in the same company without identifying the x shares to be held on trust.
A woman recently died. Her valid will contains the following clause:
‘I give £10,000 to my husband absolutely. I trust him to use it fairly vis-à-vis our children.’
The executor of the woman’s will has paid £10,000 to her husband.
Which statement best describes the husband’s position in relation to the £10,000?
The husband holds the money on a discretionary trust for the children.
The husband holds the money on a fixed trust for the children.
The husband is the full legal owner of the money.
The husband holds the money on a fixed trust for himself and the children.
The clause is void and the husband receives nothing.
The husband is the full legal owner of the money.
The £10,000 is given to the husband ‘absolutely,’ which is consistent with a gift. The words ‘I trust him to’ are not sufficiently imperative to impose a duty (a trust) in relation to the money. This is supported by the fact that the content of any supposed duty – the ‘fair’ use of the money – is entirely vague.
A settlement contains a discretionary trust and a fiduciary power. The objects of the discretionary trust are ‘all children living in the United Kingdom.’ The objects of the fiduciary power are ‘all adults living in the United Kingdom.’
Which statement best describes the status of the trust and the power?
The trust and the power are void.
The trustees can determine whether the trust and the power are valid.
The power is valid but the trust is void.
The trust and the power are valid.
The trust is valid but the power is void.
The trust in clause 1 is valid but the trust in clause 2 is void.
? The power is valid but the trust is void.
woman recently died. Her valid will contains the following clauses:
‘1. I give £10,000 to my trustees to distribute in equal shares amongst my biological children.
I give £10,000 to my trustees to distribute in equal shares amongst persons who have a moral claim on me.’
Which statement best describes the status of the trusts in clauses 1 and 2?
The trusts in clauses 1 and 2 are valid.
The trust in clause 1 is valid but the trust in clause 2 is void.
The trustees can determine whether the trusts are valid or void.
The trusts in clauses 1 and 2 are void.
The trust in clause 1 is void but the trust in clause 2 is valid.
Where a trust involves equal distribution among the members of a class, it must be possible to compile a complete list of the members of the class. Since the class in clause 2 – ‘persons who have a moral claim’ on the deceased – is conceptually uncertain, it is not possible to identify the members of the class. As a result, the trust in clause 2 is void for uncertainty of objects.
Two trustees, A and B, hold a trust fund on trust for C, who is 12 years old. The trust fund includes a house which is currently unoccupied and not producing any rental income for the trust. A and B have decided to sell the house. A would like to buy it. The trust deed does not contain any provisions authorising trustees to purchase trust property.
Which of the following is the most appropriate advice to A?
A can’t buy the house but they could incorporate a company and use the company to buy the house instead.
A can buy the house as long as they pay market value.
A can buy the house if B agrees.
A can buy the house if C’s parents agree.
A cannot buy the house.
A cannot buy the house.
Buying the house would be self-dealing. It is not authorised by the trust deed and the beneficiary is a minor so cannot provide consent.
A trust has two trustees, A and B. The beneficiaries are minors. The trustees require legal advice on a tax issue which has arisen in relation to the trust. A is a partner at a law firm so B suggests that there is no need to obtain advice. A specialises in real estate and is not confident in providing tax advice so suggests instructing a tax partner at their firm.
What is the best advice to the trustees?
The trustees can obtain advice from A’s firm if A reasonably believes that their colleague is the best person to provide advice on this matter.
The trustees can obtain advice from A’s colleague because A is not competent to advise on tax so it would be a breach of fiduciary duty to do so.
The trustees should obtain fee quotations from several firms first. They can instruct A’s colleague if their fees are the lowest.
The trustees can obtain advice from A’s firm because the advice is being given by a different solicitor so there would be no breach of fiduciary duty.
The trustees should obtain advice from a different firm because A has a personal interest in this firm so it would be a breach of fiduciary duty to instruct them.
The trustees should obtain advice from a different firm because A has a personal interest in this firm so it would be a breach of fiduciary duty to instruct them.
Instructing another partner at A’s firm would involve a conflict between A’s duties to the beneficiaries and A’s personal interest in the firm.
In which of the following circumstances is it permissible for a trustee to make a profit out of their role as trustee?
If the profit is either permitted by the terms of the trust or fully informed consent is provided by all the beneficiaries.
Only if fully informed consent is provided by all the beneficiaries.
Only If there is no conflict between the trustee’s personal interest and their duties to the beneficiaries.
Only if the profit is permitted by the terms of the trust.
If the profit is either permitted by the terms of the trust or fully informed consent is provided by all the beneficiaries and there is no conflict between the trustee’s personal interest and their duties to the beneficiaries
If the profit is either permitted by the terms of the trust or fully informed consent is provided by all the beneficiaries.
The trust terms may authorise the trustee to make a profit. If the profit is not authorised, the trustee will need the fully informed consent of all the beneficiaries.
In breach of trust, a trustee misapplies £100,000 of the trust fund. A solicitor dishonestly helps the trustee to misapply the money and move it offshore. Later, an accountant dishonestly helps the trustee to falsify the trust accounts.
Which one of the following statements is correct?
The accountant is liable as a dishonest assistant but the solicitor is not.
Neither the accountant nor the solicitor is liable as a dishonest assistant.
Beneficiaries can sue only trustees in connection with a breach of trust.
Both the accountant and the solicitor are liable as dishonest assistants.
The solicitor is liable as a dishonest assistant but the accountant is not.
Both the accountant and the solicitor are liable as dishonest assistants.
Both the solicitor and the accountant assisted the trustee and did so dishonestly. It is irrelevant that the accountant assisted after the breach: it is sufficient that the accountant assisted the trustee to obfuscate the breach.
True or false: For the purposes of dishonest assistance claims, the standard of dishonesty is objective.
False
True
True
Dishonesty is an objective standard: Ivey v Genting Casinos (UK) Ltd (trading as Crockfords Club) [2017] UKSC 67.
A company director commits a breach of fiduciary duty. The director is dishonestly assisted by an accountant. The breach causes the company a significant loss. The accountant makes a substantial profit as a result of the director’s breach.
Which one of the following statements is correct?
The accountant is liable for the profit if his participation in the breach was the real or effective cause of the profit.
The company can only recover losses in connection with the director’s breach of fiduciary duty.
The company cannot sue the accountant for dishonest assistance because only trust beneficiaries can bring that type of claim.
The accountant is liable for the profit if his participation in the breach was a ‘but for’ cause of the profit.
The company can only sue the director in connection with the breach of fiduciary duty.
The accountant is liable for the profit if his participation in the breach was the real or effective cause of the profit.
A dishonest assistant is only liable for profits if his participation in the breach was the real or effective cause of the profit: Novoship (UK) Ltd v Mikhaylyuk [2014] EWCA Civ 908.
True or false: Only trust beneficiaries can utilise the equitable tracing and claiming rules.
True
False
False
The equitable tracing and claiming rules can be utilised by persons other than trust beneficiaries; for example, the beneficiaries of a deceased person’s estate and companies.
Which of the following is not an asset over which a beneficiary may be able to make a claim?
An asset purchased with a mixture of trustee money and money belonging to an innocent third party
An asset purchased exclusively with the traceable proceeds of misapplied trust money
An asset purchased with a mixture of misapplied trust money and the trustee’s own money
An asset purchased exclusively with misapplied trust money
An asset purchased with a mixture of misapplied trust money and money belonging to an innocent third party
An asset purchased with a mixture of trustee money and money belonging to an innocent third party
The beneficiary has no right to make a proprietary claim over assets which do not represent the traceable proceeds of a breach of trust (or fiduciary duty)? All the other options involve the use of misapplied trust money, over which the Re Diplock conditions for tracing are satisfied.
Which of the following is not an asset over which a beneficiary may be able to make a claim?
An asset purchased with a mixture of trustee money and money belonging to an innocent third party
An asset purchased exclusively with the traceable proceeds of misapplied trust money
An asset purchased with a mixture of misapplied trust money and the trustee’s own money
An asset purchased exclusively with misapplied trust money
An asset purchased with a mixture of misapplied trust money and money belonging to an innocent third party
An asset purchased with a mixture of trustee money and money belonging to an innocent third party
The beneficiary has no right to make a proprietary claim over assets which do not represent the traceable proceeds of a breach of trust (or fiduciary duty)? All the other options involve the use of misapplied trust money, over which the Re Diplock conditions for tracing are satisfied.
True or false: When a trustee withdraws money from a current account containing a mixture of misapplied trust money and the trustee’s money, the basic rule is the ‘first in, first out’ rule.
False
True
False
The first in, first out rule (from Clayton’s case) is not applicable to a wrongful mixture. The basic rule is found in the cases of Hallett and Oatway.
A trustee takes £1,200 from a trust fund and pays it into their personal account, which already contains £600. The next day, the trustee withdraws £1,200 from the account and uses it to buy shares in a company. The trustee then withdraws £600 from the account and dissipates it.
Which of the following represents the best advice to the beneficiary?
The money in the account is shared rateably between the trustee and beneficiary. The trustee is treated as spending £400 of their own money and £800 of trust money on the shares. The money which was dissipated is attributed in the same proportions, meaning £200 of the dissipated money is trustee money and £400 is trust money.
The money withdrawn from the account can all be treated as trust money but only if there are no competing creditors, meaning the trustee spent £1,200 on the shares and dissipated their own £600. If there are competing creditors, the first £600 withdrawn from the account must be treated as the trustee’s own money, meaning the trustee spent £600 of their own money and £600 of trust money on the shares (and then dissipated £600 of trust money).
The first £600 withdrawn from the account must be treated as the trustee’s own money, meaning the trustee spent £600 of their own money and £600 of trust money on the shares. The trustee then dissipated £600 of trust money.
The money in the account is shared equally between the trustee and beneficiary. The trustee is treated as spending £600 of their own money and £600 of trust money on the shares. The money which was dissipated is attributed in the same proportions, meaning £300 of the money in the account is trustee money and £300 is trust money.
The money withdrawn from the account can all be treated as trust money, meaning the trustee spent £1,200 on the shares and dissipated their own £600.
The money withdrawn from the account can all be treated as trust money, meaning the trustee spent £1,200 on the shares and dissipated their own £600.
This is a wrongful mixture, part of which has been dissipated. The basic rule (in Hallett and Oatway) is that the trustee is treated as dissipating their own money and using the beneficiary’s money to acquire a traceable asset. Cherry picking does not come into play here because there is a straight choice between the beneficiary’s money being used to acquire an asset or being dissipated. This falls squarely within the basic rule.
A trustee takes £600 from Trust A and pays the money into their personal current account (which was previously empty). The next day, the trustee takes £1,200 from Trust B and pays it into the same account. The next day, the trustee withdraws £1,200 from the account and uses it to buy shares in a company. The trustee dissipates the remaining £600 in the account.
What is the most likely way in which the withdrawals from the account will be attributed to the beneficiaries of the two trusts?
The withdrawals from the account should be shared equally by the beneficiaries. The trustee should be treated as spending £600 from Trust A and £600 from Trust B on the shares.
The trustee should be treated as withdrawing the money from Trust B before Trust A. The shares were bought exclusively with money from Trust B. Trust A’s money was all dissipated.
The withdrawals from the account should be shared rateably by the beneficiaries. The trustee should be treated as spending £400 from Trust A and £800 from Trust B on the shares.
The trustee should be treated as withdrawing the money from Trust A before Trust B. The first £600 withdrawn from the account is Trust A’s money. The remainder of the £600 withdrawal comes from Trust B.
The withdrawals from the account should be shared rateably by the beneficiaries. The trustee should be treated as spending £400 from Trust A and £800 from Trust B on the shares.
Although this is a current account, the rule in Clayton’s case is easily disapplied in cases of unfairness. Applying the rule in this case would mean that the beneficiaries of Trust A can trace all their money into the shares and the beneficiaries of Trust B could only trace half their money into the shares, with the remaining half being dissipated. This feels very unfair given the order in which the payments were made, so it would make sense to apply the pari passu ex post facto rule or rolling charge instead. (In these circumstances, both produce the same result.)
True or false: Proprietary claims can be made against any person who receives misapplied trust property.
False
True
False
Proprietary claims cannot be made against a purchaser for value without notice of the trust. The beneficiary can trace into the sale proceeds but has no recourse against the purchaser.
In breach of trust, a trustee misappropriates £10,000 of the trust fund. He uses the money to purchase shares in a company.
Which one of the following statements describes the beneficiary’s rights?
The only claim available to the beneficiary is a personal claim against the trustee for £10,000.
The beneficiary may elect between an ownership claim to the shares and a security claim to the shares.
The only claim available to the beneficiary is a proprietary ownership claim to the shares.
The beneficiary can make a personal claim against the trustee for £10,000 or a proprietary claim to the shares, as the trustee determines.
The only claim available to the beneficiary is a security claim to the shares.
?? week 5.4?
True or false: The beneficiary of a trust has a knowing receipt claim against an innocent recipient of misapplied trust property.
False
True
False
Knowing receipt is a fault-based liability.
CARDS AFTER THIS NEED TO BE PUT IN LAND!!
A trustee holds a painting on trust for a beneficiary. In breach of trust, the trustee gifts the painting to the owner of a private art gallery. The painting is delivered to the gallery by a courier hired by the trustee. The gallery owner and the courier are aware that the painting is misapplied trust property. The gallery owner sells the painting and dissipates the proceeds of sale.
Which one of the following statements describes the beneficiary’s rights?
The beneficiary can maintain a knowing receipt claim against the gallery owner but not against the courier.
The beneficiary can maintain a knowing receipt claim against the gallery owner and the courier.
The beneficiary can maintain a knowing receipt claim against the courier but not against the gallery owner.
The beneficiary can only sue the trustee for breach of trust.
The beneficiary cannot maintain a knowing receipt claim against the gallery owner or the courier.
The beneficiary can maintain a knowing receipt claim against the gallery owner but not against the courier.
Both the gallery owner and the courier possess knowledge sufficient for a knowing receipt claim. However, unlike the gallery owner, the courier’s receipt of the painting was ministerial only.
One of the situations where undue influence may arise is where there is a relationship of influence of which unfair advantage is taken. There are a number of relationships where there is an irrebuttable presumption that one party has influenced the other. Which ONE of the following is NOT within that number?
Solicitor and client
Husband and wife
Doctor and patient
Trustee and beneficiary
Parent and child
Husband and wife
Correct. In cases where undue influence is claimed, it will not be presumed but will need to be positively shown.
In addition to a relationship of trust and confidence, what else must be shown for a claim of undue influence to succeed?
A transaction which involves misrepresentation.
A transaction which requires explanation.
A transaction which involves fraud.
A transaction which requires explanation.
Correct. If there is a relationship of trust and confidence the transaction must be one that initiates the question ‘why has X signed this?’ If it is, undue influence is established.
In Barclays Bank v O’Brien, why was the bank unable to enforce its charge against Mrs O’Brien?
The bank had unduly influenced Mrs O’Brien into signing the charge without ensuring she was fully informed.
Mr O’Brien had unduly influenced his wife to sign the charge without ensuring she was fully informed.
The bank had constructive notice of Mr O’Brien’s undue influence and failed to take reasonable steps to ensure that Mrs O’Brien was fully informed.
The bank had constructive notice of Mr O’Brien’s undue influence and failed to take reasonable steps to ensure that Mrs O’Brien was fully informed.
Correct. The bank had notice of the potential risk of undue influence and should have ensured that Mrs O’Brien fully understood what she was signing.
In RBS v Etridge, the court extended the scope of the principles of constructive notice of undue influence. Which one of the following is the most accurate statements of the effect of this case?
The principles are relevant in every case where the relationship between the person claiming undue influence and the debtor is non-commercial.
The principles are relevant where the relationship between the person claiming undue influence and the debtor is one of husband and wife and civil partners.
The principles are relevant where the relationship between the person claiming undue influence and the debtor is one of husband and wife.
The principles are relevant in every case where the relationship between the person claiming undue influence and the debtor is non-commercial.
Correct. The idea of constructive notice now extends far beyond family and spousal relationships.
Which case sets any guidance as to the steps a lender should take to avoid being fixed with constructive notice of undue influence?
CIBC v Pitt
Barclays Bank v O’Brien
RBS v Etridge
RBS v Etridge
Where a borrower has created three legal mortgages, in favour of three different lenders, on consecutive days, how do we work out which takes priority?
Priority between legal charges depends on the order in which the deeds are executed.
Priority between legal charges depends on the order specified in the mortgage deeds.
Priority between legal charges depends on the order in which they have been registered
Priority between legal charges depends on the order in which they have been registered
Correct. This is the rule in LRA 2002, s48.
Where a borrower has created three equitable mortgages, in favour of three different lenders, on consecutive days, how do we work out which takes priority?
Priority between equitable mortgages depends on the order in which they are protected by registration.
Priority between equitable charges depends on the order specified in the mortgage deeds.
Priority between equitable mortgage depends on the order in which they are created.
Priority between equitable mortgage depends on the order in which they are created.
Correct. Equitable mortgages do not have to be registered in order to be created properly. LRA 2002, s28 which relates to equitable interests, says that equitable interests take effect in the order in which they are created.
An equitable mortgage can be (but does not have to be) protected by entering a s32 Notice on the Charges Register. If an equitable mortgage has been protected, what does that mean in terms of priority?
It takes priority over ALL subsequent equitable mortgages only.
It takes priority over ALL subsequent mortgages, whether legal or equitable.
It takes priority over all equitable mortgages even those which are created before it.
It takes priority over ALL subsequent mortgages, whether legal or equitable.
Correct. LRA 2002, s29(2) says that an interest which is protected takes priority over all subsequent transactions.
What is the consequence if a lender exercises its power of sale under a legal mortgage, but the sale proceeds are insufficient to discharge the mortgage debt?
The lender may sue the borrower in contract for the outstanding debt.
The lender cannot recover the shortfall.
The lender can recover a shortfall of capital but not interest by suing the borrower in contract for the outstanding debt.
The lender may sue the borrower in contract for the outstanding debt.
Correct. The right to sell is a proprietary remedy which coexists with the contractual remedy which does not extinguish it.
To whom does a receiver owe a duty to act with due diligence?
The court.
The lender.
The borrower.
The borrower.
Correct. This may seem odd, as the receiver is appointed by the lender, but it means that the lender is not liable for the receiver’s negligence.
Foreclosure is rarely used by lenders, yet it does have an advantage for a borrower who is in serious debt and is in ‘negative equity’. What is that advantage?
The foreclosure process takes a long time and buys the borrower time to make alternative arrangements.
All subsequent mortgages and the contractual debt are extinguished.
The court can award a sale in lieu of foreclosure.
All subsequent mortgages and the contractual debt are extinguished.
Correct. The borrower cannot be sued personally either by the lender who forecloses or any subsequent lender.
The legal lender has the right to sue the borrower in person for the contractual debt. What is the limitation period for a contractual debt for a legal mortgage?
6 years for capital and 12 years for interest.
6 years for capital and interest.
12 years for capital and 6 years for interest.
12 years for capital and interest.
12 years for capital and 6 years for interest.
This is correct. The limitation period for a contractual debt is not straightforward: if the mortgage has been created by deed, as all legal mortgages must be, then the period for recovery of the debt stated in the deed (the capital) is twelve years. The limitation period for recovery of interest is six years. What this means in reality is that borrowers can find themselves involved in contractual debt actions many years after repossession, when they may have thought that their troubles were behind them.
What is the purpose of the Pre-Action Protocol 2008?
It enables lenders to enter residential or commercial premises to prepare them for sale.
It sets out an expectation that lenders will explore alternative arrangements with a borrower before taking possession of residential properties.
It sets out an expectation that lenders will explore alternative arrangements with borrower before taking possession of residential or commercial properties.
It enables the lender of a commercial property to manage it rather than sell it straight away.
It sets out an expectation that lenders will explore alternative arrangements with borrower before taking possession of commercial properties.
It sets out an expectation that lenders will explore alternative arrangements with a borrower before taking possession of residential properties.
Correct. It was intended to reduce the number of residential properties which were being repossessed and the number of families losing their homes. Lenders agreed that possession should be a last resort.
When does the mortgagee acquire the right to possess mortgaged property?
When the court has granted order for possession.
When a mortgage payment is missed.
Immediately the mortgage deed is signed.
When interest is in arrears for two months.
Immediately the mortgage deed is signed.
Correct. This is set out in Four Maids v Dudley Marshall and LPA 1925, s95(4). It is set out expressly in most mortgage deeds, although there will be an acknowledgement by the lender that it will not exercise the right whilst payments are met.
Why might a lender choose to apply to the court for an order for possession?
The Pre-Action Protocol of 2008 requires an order for possession to be obtained.
To avoid allegations of trespass.
To avoid possible criminal proceedings following allegations of use of force to gain entry to premises.
To avoid possible criminal proceedings following allegations of use of force to gain entry to premises.
Correct. The order for possession gives the lender authority to possess and protect the lender from criminal proceedings under Criminal Law Act 1977, s6.
The court has jurisdiction under AJA 1970, s 36 in relation to applications relating to a mortgaged property by the lender. Which of the following best describes the scope of s 36?
It enables a court to prevent a lender from possessing residential and commercial properties.
It enables a court to prevent a lender from exercising its power of sale.
It enables a court to postpone possession of residential and commercial properties.
It enables a court to postpone possession of a residential property where an order has been applied for by the lender.
It enables a court to postpone possession even in cases where no possession order has been applied for.
It enables a court to postpone possession of a residential property where an order has been applied for by the lender.
Correct. The court can postpone possession of residential properties only and has discretion as to timing and conditions.
AJA 1970, s 36 enables a court to postpone an order for possession provided that the borrower can pay ‘any sums due’ within a ‘reasonable period’. Which of the following best explains this?
The borrower must pay the whole of the mortgage debt including arrears on a date set by the court before the end of the term.
The borrower must pay the arrears and accrued interest within 24 months of the arrears arising.
The borrower must pay the arrears before the end of the mortgage term.
The borrower must pay the arrears before the end of the mortgage term.
Correct. This generous interpretation of the effect of s 36 is set out in AJA 1973, s 8 and Cheltenham & Gloucester Building Society v Norgan.
Will a court postpone an order for possession to allow the borrower to sell the property?
No. Courts are suspicious of potential delaying tactics by the borrower and will not postpone for this reason.
Yes. Courts prefer borrowers to sell property themselves to save costs and ensure the sale proceeds quickly.
No. Courts must act in the lender’s best interests once arrears have arisen.
Yes, if there is firm evidence of an imminent exchange of contracts.
Yes, if there is firm evidence of an imminent exchange of contracts.
Correct. This was decided in Mortgage Services Funding plc v Steele. Simply instructing a solicitor will not be enough.
In which ONE of the following circumstances does the right to sell become exercisable under LPA 1925, s 103?
Three months after the lender has served notice requesting arrears to be paid.
When two months’ interest payments are outstanding.
When some of the interest is unpaid for two months or more.
When some of the interest is unpaid for two months or more.
Correct. LPA 1925, s 103(ii) states that some interest must be outstanding for two months. It does not mean that two months’ worth of arrears is owed! The amount can be very small.
A property has two charges secured on it. The second lender sells under the right of sale. Which of the following represents the correct procedure?
The first loan is redeemed first, then the second loan with any surplus being paid to the borrower.
The second loan is redeemed first, then the first loan, with any surplus being paid to the borrower.
The first loan is redeemed first, then the second loan, and any surplus proceeds are divided proportionately between the first lender and the second lender.
The first loan is redeemed first, then the second loan with any surplus being paid to the borrower.
Correct. The first lender takes priority and is paid first, even though the second lender actually sold. The surplus proceeds are held in trust of the first borrower.
When selling, which of the following statements best expresses the lender’s duty as to the timing of the sale in a slow market?
The lender must delay the sale if there is any prospect of planning permission being granted.
The lender must sell immediately the right to sell becomes exercisable.
The lender must wait a reasonable time for an upturn in the market.
The lender has an unfettered discretion as to when to sell and need not delay.
The lender has an unfettered discretion as to when to sell and need not delay.
The lender has an unfettered discretion as to when to sell and need not delay.
The lender owes the borrower a duty to take reasonable care to obtain the true market value for the property. Which of the following is the most accurate statements of what ‘true market value’ means in this context?
The lender must obtain the maximum possible price in that particular market but need not delay sale.
The lender cannot be expected to achieve the perfect sale price, but the price must be in the correct bracket.
The lender owes a duty to carry out repairs and improvements to the property to obtain the highest possible price.
The lender cannot be expected to achieve the perfect sale price, but the price must be in the correct bracket.
Correct. This was the decision in Michael v Miller.
When does the lender’s rights to sell arise, where the mortgage is a capital and interest repayment mortgage?
As soon as the ink is dry on the mortgage deed.
As soon as one monthly instalment is unpaid.
When the legal date of redemption has passed.
As soon as one monthly instalment is unpaid.
Correct. LPA 1925, s 101(1) says that the right arises when the mortgage money ‘has become due’. In an interest-only mortgage, that will happen on the legal redemption date; in a capital and interest repayment mortgage, that happens when any payment of capital has been missed.
What is the effect of failure to comply with section 53(1)(b) LPA 1925?
The trust is void
The trust is unenforceable
The trust is unenforceable
Section 53(1)(b) LPA 1925 is an evidential requirement only.
Which of the following trusts would be unenforceable?
A person calls their friend to inform them that they will be transferring their house to the friend to hold on trust for the person’s sibling. After the legal transfer has been effected, the person sends a signed letter to the friend confirming the terms of the trust.
A person orally declares themselves to be holding their house on trust for their sibling and then sends the sibling a signed letter to confirm the terms of the trust.
A person sends a signed letter to their friend to inform them that they will be transferring their house to the friend, to hold on trust for the person’s sibling. The letter contains the terms of the trust. The person then effects the legal transfer of the house.
A person orally declares that they are holding their house on trust for their sibling and then leaves their sibling a voicemail to confirm the terms of the trust
A person sends their sibling a signed letter declaring that they now hold their house on trust for the sibling. The letter contains the terms of the trust.
A person orally declares that they are holding their house on trust for their sibling and then leaves their sibling a voicemail to confirm the terms of the trust
This trust does not satisfy the requirements of s53(1)(b) LPA 1925 as there is no signed, written evidence of the trust.
True or false: Section 53(1)(b) LPA 1925 only applies to declarations of trusts of land.
False
True
True
Section 53(1)(b) LPA 1925 contains the formalities requirements for declaring a trust of land. Declarations of trusts over other types of property do not need to comply with this provision.
Match the trust to the perpetuity rule
Non-charitable purpose trusts: Rule against inalienability
Trusts with beneficiaries or charitable purposes as objects: Rule against remoteness of vesting
Which of the following best describes the rule against remoteness of vesting?
The trust property must vest within the common law period of 21 years. It must be clear from the outset that the trust property will vest within that time. It is possible to wait and see whether it vests in that time.
The trust property must vest within the common law period of 125 years. It is possible to wait and see whether it vests in that time.
The trust property must vest within the common law period of 21 years. It must be clear from the outset that the trust property will vest within that time.
The trust property must vest within the statutory period of 125 years. It is possible to wait and see whether it vests in that time.
The trust property must vest within the statutory period of 125 years. It must be clear from the outset that the trust property will vest within that time.
The trust property must vest within the statutory period of 125 years. It is possible to wait and see whether it vests in that time.
Which statement best describes the effect of a non-charitable purpose trust having an uncertain purpose?
The trustees can use their discretion to interpret the purpose as they see fit.
The trust is likely to be void.
The trustees should carry out the elements of the purpose which are certain and disregard elements of the purpose which are uncertain.
The court will strive to interpret the purpose as being sufficiently certain if it is possible to do so.
The trustees can make an application to court for scheme of administration setting out how to administer the trust.
The trust is likely to be void
A non-charitable purpose trust which is insufficiently certain will be void.
True or false: A trust will only be charitable if the purpose of the trust falls strictly within a recognised charitable purpose.
True
False
False
There is provision for purposes which are analogous to or within the spirit of the statutory purposes to be charitable.
Which of the following would NOT be a charitable purpose?
The provision of a homework club.
The preservation of an area of outstanding natural beauty.
The funding of a mountain rescue service.
The repair and maintenance of a churchyard
The care of family pets.
The care of family pets.
The care of specific animals is not charitable, although the welfare of animals generally is a charitable purpose.
A testator intends to create a charitable trust to promote the work of an amateur artist who specialises in minimalistic modern art. Which of the following statements is correct?
The purpose will only be charitable if it can be shown that the art is of educational value.
The purpose may be charitable but expert evidence of artistic merit may be required.
The purpose may be charitable if the artist believes it is of artistic merit.
The purpose is charitable.
The purpose is not charitable.
The purpose may be charitable but expert evidence of artistic merit may be required.
The purpose may fall under the charitable purpose of the advancement of the arts. Charity Commission guidance provides that to be charitable the art needs to be of merit, and the assessment of this may require expert evidence.
Before the advancement of the arts became a head of charity in its own right the promotion of art could only be charitable if it could be brought within the advancement of education. This is no longer the case following the Charities Acts of 2006 and 2011.
True or false: If a trust has charitable purposes, it is presumed to have public benefit.
False
True
False
Public benefit is a separate issue which must be proved.
An employer wishes to establish a sports club for its employees.
Is it possible to create a charitable trust for this purpose?
Yes, but only if there are no fees payable by the employees, to ensure that nobody is excluded due to inability to pay.
No. This is not a charitable purpose.
No. The employees of the company are a private class of individuals meaning the public benefit test would not be satisfied.
Yes, but only if the company has a large number of employees meaning that they are treated as a ‘section of the public’
Yes. The advancement of amateur sport is a charitable purpose.
No. The employees of the company are a private class of individuals meaning the public benefit test would not be satisfied.
Correct. Although the advancement of amateur sport is a charitable purpose, the public benefit test would not be satisfied here because the class of individuals who can benefit has been limited by reference to a specific person i.e. the employer.
A testator has left £10,000 in their will for “the purpose of educating the poor”.
What is the effect of this provision?
The £10,000 will be held on a charitable trust. The trustees will have discretion as to how to achieve the testator’s intention.
The £10,000 is not held on a charitable trust because the class of potential objects is too wide.
The £10,000 is not held on a charitable trust because the purpose is not charitable.
The £10,000 will be applied cy-pres because the specific purpose is unclear but the testator has shown a general charitable intent
The £10,000 is not held on a charitable trust because the purpose is uncertain.
The £10,000 will be applied cy-pres because the specific purpose is unclear but the testator has shown a general charitable intent
The testator has shown a general charitable intent (as both the advancement of education and the relief of poverty are charitable purposes) but as they have failed to specify the method by which this purpose should be achieved, the cy-pres doctrine will apply.
Which of the following is capable of being a valid purpose in relation to a non-charitable testamentary trust?
To promote the objectives of my local neighbourhood sustainability project.
To maintain the lawn and gardens of my family home.
To fund an annual memorial lecture in my name.
To look after my pet cat after my death.
To maintain my collection of antique clocks in good working order.
To look after my pet cat after my death.
Looking after animals generally may be a charitable purpose. However, looking after specific animals falls within a recognised Endacott exception to the beneficiary principle such that it is capable of being a valid non-charitable purpose.
Which of the following statements is correct?
Trusts for purposes are only valid if the purpose is charitable.
Trusts for non-charitable purposes are valid but may be unenforceable if there is no beneficiary.
Trusts for non-charitable purposes are void unless someone is appointed who can enforce the trust against the trustees.
Trusts for purposes are void because they do not have beneficiaries who can enforce the trust.
Trusts for non-charitable purposes are void unless the purpose falls within limited recognised exceptions.
Trusts for non-charitable purposes are void unless the purpose falls within limited recognised exceptions.
Non-charitable purpose trusts are prima facie void because they breach the beneficiary principle. However, there are a limited number of recognised exceptions. To be valid the trust must also be sufficiently certain and comply with perpetuity rules.
To be valid a non-charitable purpose trust must fall within a recognised exception to the beneficiary principle. What other two requirements must a testator check are satisfied?
That the purpose is sufficiently certain and satisfies the test of providing a public benefit.
That the purpose satisfies the test of providing a public benefit and the trust complies with perpetuity rules.
That there is an identifiable beneficiary and the trust complies with perpetuity rules.
That the purpose is sufficiently certain and the trust complies with perpetuity rules.
That the purpose is sufficiently certain and there is a person capable of enforcing the trust against the trustees.
That the purpose is sufficiently certain and the trust complies with perpetuity rules.
To be a valid a non-charitable purpose trust must fall within an Endacott exception, be sufficiently certain and comply with perpetuity rules.
True or false: If a settlor intends to make a transfer on trust but fails to transfer legal title to the trustee, equity will automatically treat them as having made a self declaration of trust.
False
True
False
Milroy v Lord makes clear that equity will not require the settlor to take on the role of trustee if that was not their intention.
A father writes to his daughter declaring himself to be holding his house on trust for his daughter. He signs the letter and sends it to his daughter.
Has this trust been validly constituted?
Yes. In order to constitute a trust of land, the trust must be declared in writing and signed by the settlor. As the father has signed the letter, this means the trust has been constituted correctly.
No. The trust has not been constituted because the letter has not yet been received by the daughter. Until she has signed evidence of the declaration of trust, the trust is void.
No. In order to constitute a trust of land, the declaration of trust must be made by deed. Until this occurs, the trust is not constituted and so it is void.
No. The transfer of beneficial ownership to the daughter must be registered with the land registry for the trust to be constituted.
Yes. As this is a self-declaration of trust there is no movement of legal title and so the trust is automatically constituted when it is declared by the father.
Yes. As this is a self-declaration of trust there is no movement of legal title and so the trust is automatically constituted when it is declared by the father.
The settlor is declaring himself a trustee and so legal title to the property is already vested in him and the trust is automatically constituted. Note the formality requirement of s53(1)(b) LPA 1925 which requires a declaration of a new trust of land to be evidenced in signed writing. This is also satisfied here.
A man wanted to gift shares to his brother. He completed a stock transfer form in favour of his brother intending to post it to him the next day. However, the man died unexpectedly that night. The man’s validly executed will leaves the shares to his sister.
Which of the following correctly explains what will happen to the shares?
The brother is the beneficial owner of the shares. Completion of the stock transfer form can be interpreted as a self-declaration of trust over the shares.
The gift was constituted when the man completed the stock transfer form but, as this has not been communicated to his brother, the gift is imperfect. His sister will inherit the shares.
The brother is the legal owner of the shares but holds them on trust for the sister.
Although the man intended to make a gift of the shares it was not fully constituted before his death and so the gift is imperfect. His sister will inherit the shares under the will.
The gift was constituted when the man completed the stock transfer form. The brother is the legal owner of the shares.
Although the man intended to make a gift of the shares it was not fully constituted before his death and so the gift is imperfect. His sister will inherit the shares under the will.
In order to transfer legal title, the man should have sent the signed stock transfer form and share certificate to the Company’s registrar under s1 of the Stock Transfer Act 1963. Legal title would pass on registration of the brother as shareholder. As this has not occurred, the gift is imperfect. Equity will not perfect an imperfect gift under the rule in Milroy v Lord or assist the brother as a volunteer.
A man tells his wife that he will transfer shares to her. He completes a stock transfer form and sends it with the share certificate to the company’s registrar. The man dies and the shares are still registered in his name.
Can the wife claim beneficial ownership of the shares?
Yes. Re Rose is likely to perfect the imperfect gift.
No. Although she may have had a beneficial interest in the shares under Re Rose whilst the man is alive, this will not survive his death.
Yes. Milroy v Lord provides that equity will always treat a failed gift as a self-declaration of trust.
Yes. Pennington v Waine will apply in this situation. The man has promised his wife that he will transfer the shares and so it would be unconscionable to go back on this.
No. Legal title passes on registration of the shares into her name. As this has not occurred before the man’s death, equity cannot perfect this imperfect gift.
Yes. Re Rose is likely to perfect the imperfect gift.
Correct
The correct method of transfer is used, the man has done everything in his power to effect the transfer and the documentation has ended up in the hands of the organisation capable of effecting the transfer i.e. the company’s registrar. Under Re Rose the wife will have a beneficial interest in the shares under a constructive trust and can force the transfer of legal title to her.
A woman wanted to give her house to her adult son. She completed a transfer deed and gave this to her solicitor who said he would finalise the gift on his return from holiday in two weeks’ time. The woman died the next day and in her validly executed will the house was left to her boyfriend.
Will the son be able to claim a beneficial interest in the house?
Yes. The Re Rose exception to Milroy v Lord will apply because the woman completed the correct method of transfer and did everything in her power to effect the transfer.
No, the house will pass to her boyfriend. The Re Rose exception to Milroy v Lord will not apply because the woman has not put the matter beyond her own control.
No, because the woman has used the wrong method of transfer.
Yes. The Re Rose exception to Milroy v Lord will apply because the woman has put the matter beyond her control.
Yes. Milroy v Lord provides that equity will always treat a failed gift as a self-declaration of trust. The woman is treated as holding the house on trust for her boyfriend as soon as she expresses the intention to make a gift.
No, the house will pass to her boyfriend. The Re Rose exception to Milroy v Lord will not apply because the woman has not put the matter beyond her own control.
Re Rose will not apply because, whilst she used the correct method of transfer (a deed under s52(1) LPA 1925) this has not yet been sent to the land registry and so has not ended up in the hands of the person capable of effecting the transfer. Instead, the transfer documentation is with her own agent (her solicitor); an extension of herself. Therefore, she has not done all within her power to effect the transfer under Re Rose. Nor has she put the matter beyond her control as in Mascall v Mascall.
True or false: The rule in Re Rose can be used to perfect imperfect gifts but not to perfect imperfect trusts.
True
False
False
The rule can be applied to the perfection of both gifts and trusts.
True or false: If a person dies after expressing an intention to make a gift but before delivering the asset to the donee, equity will perfect the imperfect gift as long as the donor did not change their mind before they died.
True
False
False
it is not sufficient that the donor’s intention remained unchanged before their death. The gift must either be conditional upon death and satisfy the requirements of a donatio mortis causa, or it must be intended to be immediate and satisfy the requirements of Strong v Bird.
A man wishes to give a five-acre paddock to his adult granddaughter to open a riding stable. The man’s solicitor completes the transfer documentation, but the man then dies unexpectedly before the granddaughter is registered as the owner. In the man’s validly executed will, his grandson is due to inherit the land. The granddaughter and her sister are appointed executors.
Can the granddaughter claim beneficial ownership of the land?
No, because she was not registered as the legal owner before the grandfather’s death.
Yes, because her grandfather made the gift shortly before his death, meaning that it was a donatio mortis causa.
Yes but she can only claim a beneficial share in half the land because there is another executor.
Yes, under the rule in Strong v Bird.
No. The rule in Strong v Bird will not apply because she is not the only executor.
Yes, under the rule in Strong v Bird.
The requirements for Strong v Bird are satisfied. There is a continuing intention to make an immediate gift and the intended donee is one of the executors of the donor’s will (Re Stewart).
A professional musician decided to give her prized cello to her niece on her retirement. She took her niece out to lunch to announce the news, promising that she would arrange delivery as she played her last concert later that month. The woman died in an accident later that day. Her validly executed will, in which her niece was named executor, left all her instruments to a youth orchestra.
Who owns the cello?
The cello will go to the youth orchestra under the cellist’s will. The rule in Strong v Bird will not apply here as the niece has no written proof of the cellist’s intention.
The cello will go to the niece who will be able to claim it under the rule in Strong v Bird because the cellist had a continuing and immediate intention to make a gift.
The cello will go to the niece who will be able to claim it under the rule in Strong v Bird because the cellist’s intention remained unchanged at her death.
The cello will go to the youth orchestra because the cellist did not contemplate her immediate death when attempting to make the gift and so the rule in Strong v Bird will not apply.
The cello will go to the youth orchestra under the cellist’s will. Strong v Bird will not apply as the cellist does not intend to make an immediate gift.
The cello will go to the youth orchestra under the cellist’s will. Strong v Bird will not apply as the cellist does not intend to make an immediate gift.
Although there is continuing intention to make a gift (see Re Gonin) and the intended donee is the executor of the donor’s estate (Re Stewart), the cellist does not intend to make an immediate gift. The facts are analogous with Re Freeland. The cellist intends to give the cello in the future. As such, there is no intention to make an immediate gift of the cello and so this would prevent the operation of fortuitous vesting.
True or false: The presumption of resulting trust can be rebutted
True
False
True
The presumption is rebutted by evidence that the transferor did not intend the recipient to hold the property on trust for them.
Which of the following will give rise to an automatic resulting trust?
An intended gift fails due to lack of constitution
An intended self-declaration of trust fails due to uncertainty of objects
An intended transfer on trust fails due to lack of constitution
An intended transfer on trust fails due to uncertainty of objects
An intended self-declaration of trust fails due to uncertainty of subject matter
An intended transfer on trust fails due to uncertainty of objects
Where a settlor transfers property on trust but fails to adequately identify the objects of that trust, the trust will fail and the trustee will hold the property on trust for the settlor
A man purchases a piece of land which he intends to use for a new business venture. His boyfriend contributes 50% of the purchase price for the land but the man is registered as the sole legal owner of the land. The couple break up and the boyfriend claims that he is entitled to a share of the land. There is no express trust declared over the property and no evidence that the boyfriend intended a gift or a loan when contributing towards the land.
What is the most likely conclusion that a court will reach as to the legal and equitable ownership of the land?
The man is the sole legal and beneficial owner of the land.
The man and his boyfriend are legal joint tenants and hold the land on trust for themselves as equitable tenants in common in equal shares.
The man holds the land for himself and his boyfriend as equitable tenants in common in equal shares.
The man and his boyfriend are legal joint tenants and hold the land on trust for themselves as equitable joint tenants.
The man holds the land for himself and his boyfriend as equitable joint tenants.
The man holds the land for himself and his boyfriend as equitable tenants in common in equal shares.
This is the most likely conclusion. As there is no evidence to rebut the presumption of resulting trust, the man will hold the land on trust for himself and his boyfriend, with their shares reflecting their respective contributions to the land. They will therefore be equitable tenants in common and will each have a 50% share. This is different to joint tenancy, where they would both own 100% of the land.
True or false: If legal title to a family home is held by cohabitees as joint tenants, it is presumed that they have 50/50 shares in equity.
False
True
False
The presumption is one of joint tenancy. Joint tenancy does not involve distinct shares. 50/50 would be a tenancy in common.
A couple are civil partners and have lived together for 10 years. They decide to dissolve their partnership and sell their family home which they own as legal joint tenants. There is no express trust over the home. They disagree over how the proceeds of sale should be divided between them and they take the case to court.
How will the court determine beneficial ownership of the family home?
The court will determine beneficial ownership based on the contributions each of them made to the acquisition of the home.
They are presumed to be equitable joint tenants but this presumption may be rebutted by evidence of an alternative common intention. The court will determine their beneficial interests based on the whole course of conduct.
This is a common law marriage because of the length of the relationship. This gives the court discretion to determine their respective beneficial interests.
The court has a statutory discretion to determine their respective beneficial interests because they are civil partners.
The court has no discretion. They couple are legal joint tenants so they are presumed to be joint tenants in equity too. The court will sever the joint tenancy and award half shares.
The court has a statutory discretion to determine their respective beneficial interests because they are civil partners.
On the dissolution of a civil partnership the court can exercise its’ discretion under the Civil Partnership Act 2004 to divide ownership of the property between the parties.
A married man purchases a flat to live in with his girlfriend. The man pays the deposit and purchases the flat in his sole name. The man is solely liable for the mortgage. He tells his girlfriend that he can’t put the flat in her name until he tells his wife about their affair, but he assures her that he is holding it on trust for them both and that she has a 50% share. In reliance on these statements, the woman pays all household expenses and contributes equally towards the mortgage repayments.
What claim would you advise the woman to make?
The woman should seek to establish an interest under a purchase money resulting trust.
The woman cannot make any claims because the man is married so the flat will be matrimonial property belonging to the man and his wife.
The woman should seek to establish an interest under an express trust.
The woman should seek to establish an interest under a common intention constructive trust.
The woman cannot make any claims because she did not contribute directly towards the acquisition of the flat.
The woman should seek to establish an interest under a common intention constructive trust.
The woman should seek to establish an interest under a common intention constructive trust.
True or false: When a couple acquire property as legal joint tenants, it is only possible to rebut the presumption of joint tenancy if it can be proved that they had a different common intention when they purchased the property.
False
True
False
Jones v Kernott confirmed that intention could be ambulatory.
Which of the following provides the best evidence that joint legal owners of a family home do not also intend to be equitable joint tenants?
Only one party takes legal responsibility for the mortgage
One party moving out of the home and ceasing to contribute towards household expenditure
Only one party contributes towards household expenditure, including mortgage repayments
Express discussions as to beneficial ownership
Rigid separation of finances
Express discussions as to beneficial ownership
Express discussions will always provide the strongest evidence of intention
A cohabiting couple own a house as legal joint tenants. There is no declaration as to beneficial shares in the property. The woman pays the deposit money to purchase the house and a mortgage is taken out in their joint names which the woman pays. The man pays for all other expenses on the property. She wants to leave her partner and she seeks advice as she wants to claim a larger share given her contributions to the deposit and mortgage.
What is the best advice to the woman?
It is presumed that the property is owned as equitable tenants in common in equal shares. The burden is on the woman to rebut this. It should be possible to rebut the presumption as it is clear from their conduct that the woman was intended to have a greater share in the property. Their interests will be quantified based on their respective contributions to the deposit and mortgage.
It is presumed that the property is owned as equitable joint tenants. The burden is on the woman to rebut this. It should be possible to rebut the presumption as it is clear from their conduct that the woman was intended to have a greater share in the property. Their interests will be quantified based on their respective contributions to the deposit and mortgage.
The couple are joint tenants at law and in equity. If they had wanted to own in different shares, they should have declared themselves tenants in common and specified their shares in writing. There is no way to challenge this.
It is presumed that the property is owned as equitable joint tenants. The burden is on the woman to rebut this. It is a heavy burden and it is unlikely that unequal contributions will be enough to rebut the presumption.
It is presumed that the parties share the beneficial ownership in proportion to their respective contributions. The onus will be on the man to rebut this presumption. It is unlikely that he will be able to do so.
It is presumed that the property is owned as equitable joint tenants. The burden is on the woman to rebut this. It is a heavy burden and it is unlikely that unequal contributions will be enough to rebut the presumption.
The burden is on the party seeking to rebut the presumption to adduce evidence and Lady Hale in Stack v Dowden said that this was a “heavy burden” requiring “unusual facts”. Fowler v Barron indicates that unequal contributions alone are not enough to rebut the presumption of joint tenancy.
True or false: In the absence of evidence of an express common intention, it is possible for the court to impute a common intention for a person without a legal interest in the family home to have an equitable interest in that home.
False
True
False
Imputation is not permissible at the acquisition stage. It is only possible when quantifying the parties’ interests
An unmarried couple buy a weekend retreat in the countryside. The cottage is registered in the woman’s sole name, but the man contributes to the deposit and to the monthly mortgage payments. They split up and the woman changes the locks and says that the man has no rights to the property.
What is the best advice to the man?
The man should claim an interest under a common intention constructive trust. He has the burden of proof but common intention is likely to be inferred based on his financial contributions.
The man should claim an interest under a common intention constructive trust. There is a presumption of joint beneficial ownership because he has contributed to the deposit and mortgage. The woman has the burden of rebutting this presumption. She is unlikely to be able to do so.
The man should claim an interest under a common intention constructive trust. He has the burden of proof but common intention is likely to be imputed based on his financial contributions.
The man should claim an interest under a purchase money resulting trust because he has contributed to both the deposit and monthly mortgage payments. The woman has the burden of rebutting the presumption of resulting trust. She is unlikely to be able to do so.
The man should claim an interest under an express trust. He has the burden of proof but should be able to establish this based on his financial contributions.
The man should claim an interest under a common intention constructive trust. He has the burden of proof but common intention is likely to be inferred based on his financial contributions.
This is the best advice. The man needs to establish that he has acquired an interest but his direct financial contributions to both the deposit and to the monthly mortgage payments should mean that a common intention to share the property can be inferred from conduct.
A woman moved into her girlfriend’s flat, which was registered in the girlfriend’s sole name. The woman repainted the living room and bedroom and bought soft furnishings whilst her girlfriend was on a business trip. When the girlfriend returned home, she asked the woman why she had gone to all this trouble. The woman explained that the flat didn’t feel like “theirs” and her girlfriend reassured her saying “don’t be silly, you know this is your home too”. Two years later, their relationship became strained and her girlfriend asked her to leave the flat. The woman refused saying, “but you said this is my home too”.
Is the woman likely to have a beneficial interest in the flat?
No. The discussions were not about ownership of the property, nor is there any evidence that the woman has detrimentally relied on them.
No. The discussions were about ownership of the property but the woman has not detrimentally relied upon them.
No. The discussions were not about ownership of the property so even though the woman has detrimentally relied upon them she will not be able to establish a common intention constructive trust.
Yes. Although the discussions were not about ownership, a common intention can be inferred based on the whole course of conduct.
Yes. The discussions were about ownership of the property and the woman has detrimentally relied on them by painting the living room and purchasing the soft furnishings.
No. The discussions were not about ownership of the property, nor is there any evidence that the woman has detrimentally relied on them.
In order to establish express common intention the statements must be about shared ownership not merely occupation. Describing the property as the woman’s “home” is unlikely to be enough (see Lloyds Bank v Rosset). Even if it were, this is not followed by detrimental reliance as she has already repainted the rooms in the flat before the statement is made. Further, decoration and purchasing soft furnishings are unlikely to amount to detrimental reliance. It is also unlikely that these actions are enough to infer common intention as they will probably not have added any significant value to the property (see obiter of Lord Walker and Lady Hale in Stack v Dowden and the contrasting cases of James v Thomas and Aspden v Elvy).
True or false: Proprietary estoppel operates as a defence only.
False
True
False
Unlike promissory estoppel, proprietary estoppel operates as a cause of action not just a defence.
A and B are romantically involved. A moves into B’s house. B says to A: ‘You will always have a secure home here with me.’ A spends £5,000 of their savings making improvements to the house. The relationship breaks down two years later and A moves out of the house. A successfully brings a proprietary estoppel claim against B.
Which one of the following remedies is the LEAST likely to be awarded to satisfy A’s equity?
An order directing B to allow A to occupy the house for the rest of her life.
An order directing B to transfer the house to A.
An order directing B to pay £5,000 to A.
An order directing B to allow A to occupy the house for five years.
An order directing B to pay £1,000 to A.
An order directing B to transfer the house to A.
An order directing B to transfer the house to A would exceed A’s expectation.
C and D are romantically involved. They do not live together. C repeatedly says to D: ‘You stick with me and you’ll be alright.’ D, a builder, converts the loft of C’s house. C pays for all the materials. D is not paid for the work. C and D’s relationship breaks down two years later. D brings a proprietary estoppel claim against C.
Which one of the following is the most likely reason why D’s claim would fail?
C has not made a qualifying assurance to D.
D has not spent any money on C’s house.
C’s statements to D were not in writing.
C and D are not married.
D has not acted to their detriment.
C has not made a qualifying assurance to D.
An assurance must relate to a right in or over identifiable property owned by the defendant. C’s assurance does not relate to any property.
True or false: Any person can be a trustee
False
True
False
A trustee must be an adult of sound mind
