Equity and Trusts SBAQs

A mother's valid will contained the following clause, "I give £500,000 to my Trustees to hold for my husband for life, remainder to such of my children who attain the age of 25 if more than one in equal shares. If all of my children die before attaining the age of 25, then for the MS Society a registered charity." When she died last year, the mother was survived by her husband and their three children, twin daughters aged 16 years and a son aged 17 years.

Which of the following statements best describes when the husband and the children could bring the trust to an end?

They will be able to bring the trust to an end when the son attains the age of 18.

They will never be able to bring the trust to an end as the trust was created by will.

They can end the trust at any time because the husband is an adult.

They will be able to bring the trust to an end when the twins are 18.

They will be able to bring the trust to an end when the son is 25.

Option E is correct. If the son attains the age of 25, at least one of the children will have satisfied the contingency. The MS Society will no longer be a potential beneficiary under the trust. As such, as the husband and the children will all then be over 18; if they agree, they could bring the trust to an end under the rule in Saunders v Vautier.

Option A is wrong because, even though the son is 18, the twin daughters will only be 16. Also, the MS Society would need to be considered as no child has satisfied the contingency.

Option B is wrong, because the rule in Saunders v Vautier can be considered by beneficiaries of any trust regardless of the circumstances of its creation.

Option C is wrong because all the beneficiaries must be considered in any decision to bring a trust to an end, not merely those who are adults.

Option D is wrong because, even though all the children are legally competent, while the contingency remains unfulfilled, the MS Society is a potential beneficiary and would have to be consulted in any possible Saunders v Vautier arrangement to end the trust.

A trust deed contains the following provision:

'My Trustees shall hold my house in Oxford on trust to permit my husband to live in the property for the remainder of his life and after his death to hold the property upon trust for such of my son and daughter who survive my husband and attain the age of 25 years.'

The son is aged 28 years and the daughter is aged 20 years.

Which of the following best describes the beneficial interests in the trust fund?

The husband, son and daughter all have vested interests.

The husband and the son have vested interests, but the daughter's interest is contingent.

The husband has a vested interest, but the son's and daughter's interests are contingent.

The husband, son and daughter all have contingent interests.

The husband has a contingent interest, but the son's and daughter's interests are vested.

Option C is correct. The husband has a vested interest. (Ordinarily, the life tenant will receive trust income - in the case of a residential dwelling, this would be any rent generated from letting the dwelling. Instead of receiving rental income, however, the life tenant can instead live in that dwelling rent- free for the rest of his life.). Remainder beneficiaries will have vested (albeit postponed) interests in capital, unless the trust makes it clear that their interests are in fact conditional on events that might not happen. In this case, there are two such conditions:

the children must reach the age of 25 years; and

they must still be alive when the husband dies (the husband's death is a certainty - the children surviving him is not).

The son's and daughter's interests will only vest if they satisfy these two conditions. We do not currently know whether the son and daughter will survive the husband (and can only know that when he dies). Given the specific wording of this trust, their interests are still contingent.

Option A is wrong. The son's and daughter's interests are conditional, not vested.

Option B is wrong. There are two conditions that the son and daughter must satisfy before their interests vest: (i) they have to reach the age of 25 years; and (ii) they have to survive the husband. The son has satisfied the former but not the latter. His interest is therefore still contingent. (This option would have been correct had the wording been 'on trust to permit my husband to live in the property for the remainder of his life and after his death to hold the property upon trust for such of my son and daughter who attain the age of 25 years' - in that case, there is only one condition the children must satisfy, ie reaching the age of 25, which the son has. The wording of the trust must therefore be carefully scrutinised.)

Option D is wrong. The husband has a vested interest - he does not have to satisfy any condition before being able to live rent- free in the house in Oxford.

Option E is wrong. The beneficial interests are the wrong way round.

A father transferred £100,000 and company shares to his son to hold on trust for the father's granddaughter and grandson, who were aged 17 and 15 respectively when the trust was created. X signed a written declaration of trust in which he instructed the son to hold the property on trust for the granddaughter and grandson until they should attain the age of 21. The granddaughter has just had her 21st birthday. The grandson has just been killed in an accident.

Which of the following statements best describes the interests of the beneficiaries?

The granddaughter's interest is contingent.

As the granddaughter and the grandson were under 18 when the trust was created, their interests are limited to income.

The trustee should transfer the granddaughter's half of the trust property to her whereupon the trust for the granddaughter will end.

As the grandson has died, his share of the trust property will be paid to his estate.

The granddaughter and grandson had the legal interest in the shares and the £100,000.

Option C is the best statement. The trust of the granddaughter's half has become a bare trust on her 21st birthday; the granddaughter is now entitled to her share of the trust as she has satisfied the contingency. When the trustee transfers her half of the trust property to her the legal and equitable interests are no longer separated.

Option A is wrong because the granddaughter's interest became vested when she attained the age of 21.

Option B is wrong because the fact that the beneficiaries are minors when the trust is created does not affect what they will receive - they have a contingent interest in both capital and income. This means that their interests are absolute and not limited to income only.

Option D is wrong because the grandson's interest continued to be contingent until his 21st birthday. As he has died before reaching 21, his interest fails and would pass according to the terms of the trust declaration, or, if the declaration is silent, there will be a resulting trust for the father, as the settlor.

Option E is wrong because under the trust the beneficiaries own the equitable or beneficial interest in the trust property; the son, as trustee, holds the legal interest.

A dentist died last week. Their will contained the following provisions:

'Clause 4: My Trustees shall hold ￡300,000 on trust for such of my children who before the age of 25 years successfully obtain an undergraduate 1st class degree ...

Clause 15: Following the payment of my debts, funeral expenses, all gifts under this will and inheritance tax, whatever remains shall belong to my wife.'

There are two children: a son aged 24 years who graduated two years ago with a 1st class degree, and a daughter aged 17 years who has decided not to go to university.

The children have agreed between them to split the ￡300,000 in equal shares.

Which of the following statements provides the best advice to the children in relation to the trust under clause 4?

The trust can be brought to an end now because the children have agreed between them what should happen to the trust property

The trust can be brought to an end once the daughter has reached the age of 18 years, but not before then.

The trust can be brought to an end now, but only if the wife agrees.

The trust can only be brought to an end once the daughter has reached the age of 18 years, but only if the wife agrees.

The trust can only be brought to an end if and when the daughter successfully obtains a 1st class degree.

Option B is the correct answer. At present, the children cannot use the rule in Saunders v Vautier to bring the trust to an end because the daughter is under the age of 18 years. Once she reaches the age of 18 years, she and the son will be, between them, absolutely entitled to the trust fund under clause 4. Even if the daughter decides not to go to university and therefore does not satisfy the contingency in clause 4, the trust fund will be paid out to 'such of my children' who satisfy that contingency. As the son has satisfied that contingency, he would in those circumstances be entitled to the trust fund in full. There is no-one else, beyond the son and daughter, who could benefit from the trust fund in clause 4.

Option A is wrong because the daughter is under the age of 18 years and therefore the conditions in the rule of Saunders v Vautier have not yet been fully met.

Options C and D are wrong. Whilst it might be good from a family perspective for the wife to agree what happens, her consent is not required. She cannot under any circumstances have a beneficial interest in the trust. Even if the daughter does not go to university, the son will take in full. No trust property will fall into the residuary estate.

Option E is wrong. Whilst the dentist may have wanted both children to go to university, if the son and daughter agree next year to bring the trust to an end, they will be able to do so using the rule in Saunders v Vautier.

A man's will gives £1 million to trustees to hold "for such of my children who attain the age of 21 and subject to this for Oxfam". The man has five children.

Which of the following statements best describes the type of trust created by the man?

The man has not created a trust as he has not determined what each of his children is to receive.

The man has created a fixed trust for his children.

The man has created a fixed trust for his children for life, remainder to Oxfam.

The man has created a discretionary trust for his children and Oxfam.

The man has created a discretionary trust for his children.

Option B is correct. The trustees hold the money on trust with an obligation to distribute the trust fund among a class of beneficiaries and they are presumed to share the fund equally.

Option A is wrong because the class is such of the man's children who attain the age of 21 and they are presumed to share the fund equally.

Option C is wrong because Oxfam will only become entitled to the trust fund if none of the man's children attain the age of 21.

Option D and E are wrong because the man has determined who is to benefit and to what extent; the trustees have no discretion.

Four years ago, a mother created a lifetime trust of "£100,000 for my son if he attains 25". When the trust was created, the son was aged 18 years. The son died before his 25th birthday, leaving his own surviving son.

Which of the following statements best describes the position with the trust fund?

The £100,000 will be paid to the son's estate.

As the son was over 18 years when the trust was created, he was entitled to receive capital from the trust fund.

As the son has a vested interest in the trust, his interest in the trust will pass automatically to his surviving son.

As the son's interest in the trust fails, the £100,000 will pass on resulting trust back to the mother (or her estate if she has also died).

As the son has died, his interest in the trust will pass automatically to his surviving son under the intestacy rules.

Option D is correct. The son's interest was contingent on his attaining 25. The son did not satisfy the contingency; this causes his interest to fail so the £100,000 will pass on resulting trust back to the mother (or to the mother's estate if mother has also died).

Options A, C and E are wrong because the son had a contingent interest which failed when he died before attaining 25; he was not entitled to anything and so there was nothing to pass to his estate (whether determined by any will or by the intestacy rules). There is no substitution of beneficial interests to surviving children unless expressly provided for in the trust instrument when it was created in the mother's lifetime.

Option B is wrong because the son had no entitlement (right) to capital when the trust was created. His entitlement was contingent.

A woman died and was survived by her wife and son who is aged 22 years. Under the terms of her will, the woman created a trust fund of her residuary estate in the following terms:

'to be held on trust for my wife for life, remainder to my son if he attains the age of 21 years but otherwise to the Solicitors Benevolent Association'.

The wife is discussing the possibility of bringing the trust to an end with the trustees.

Whose agreement is required to bring the trust to an end now?

The wife and the trustees.

Only the wife.

The wife and son.

The wife, son, and the Solicitors Benevolent Association.

The son and the Solicitors Benevolent Association.

option C is correct. The son's beneficial interest was contingent on him reaching the age of 21 years. He has satisfied that contingency and therefore his remainder interest has vested. If the son were to die before the wife, the son's beneficial interest would pass under the terms of his will or intestacy. As at today's date, therefore, the wife and son are, between them, absolutely entitled to the trust fund and can use the rule in Saunders v Vautier to bring that trust to an end.

Option A is wrong. The decision as to whether to bring the trust to an end is one for the beneficiaries alone and not the trustees.

Option B is wrong. The wife's interest is limited to income only. She is not, by herself, absolutely entitled to the trust fund.

Options D and E are wrong. As the son has satisfied the contingency, his remainder interest will not fail (even if he dies before the wife). The Solicitors Benevolent Association have no possible beneficial interest under the trust and their consent to bringing the trust to an end is not required.

Which ONE of the following scenarios creates a trust?

A singer signs a contract with a nightclub. The singer agrees to perform from 8pm until midnight on Friday and Saturday nights for the next month.

W died recently. Their will contained the following provision:

"I give £50,000 to Paul and leave it to his good judgement whether he gives part of it to Rachel"

X also died recently. Their will contained the following clause:

"I give £100,000 to Jessica and she is to use this money to pay for Kevin to attend the sixth form at The Grange Academy."

Kevin is 16 and will be starting in the sixth form next September.

Y wrote a letter which contained the following clause:

"I am giving £10,000 to Laura to hold on trust for herself."

The answer is C where the £100,00 is to be held by Jessica but used for the benefit of Kevin.

Scenario (A) did not create a trust because trusts can exist only over property and the singer held no property which could be the subject of a trust. Scenario (B) did not create a trust because no binding obligation was imposed on Paul to give any part of the £50,000 to Rachel. Scenario (D) did not create a trust because the legal and equitable interests in the £10,000 both belonged to Laura. A trust exists when the legal and equitable interests are owned by different people or separate groups of people.

Is this statement TRUE or FALSE?

Last week, a father declared that he was going to hold his shares in Betabuild plc on trust for his daughter until she should attain 25. As a result, the father became the trustee, and the daughter became the beneficiary of the shares. As trustee, the father continued to be the absolute owner of the shares but owed a duty to apply all profits and benefits for his daughter

T

True

F

False

The statement is false. A trustee is not an absolute owner. Absolute ownership means outright ownership of the property in question. Where a trust exists, the trustee holds the legal title to the property, but the equitable interest belongs to the beneficiary.

A year after creating the trust in Question 2, the father saw that the value of Betabuild shares was particularly high and thought that it would be a good idea to sell them and re-invest the money.

Who would be the correct person to sell the shares?

The father, in his capacity as trustee.

The daughter, as beneficiary.

Nobody can sell the shares.

The father and the daughter must both be parties to any sale.

The answer is A.

As the owner of the legal title to the shares, the father would be able to sell them. The daughter's equitable interest would transfer to the sale proceeds and, subsequently, to any replacement property purchased. B is not correct because Amy could sell no more than the equitable interest which she owns, and the question referred to selling "the shares" meaning the legal and equitable interests. C is not correct because trust assets can be sold at any time by the trustee as legal owner (and the sale proceeds reinvested). D is not correct because only the trustee as legal owner needs to be a party to any sale of the shares.

SKIP - COPIED WRONG

Two years ago, Xavier created a trust for his children. He appointed Sam, Tania and Victor to be the trustees. Six months ago, Sam was declared bankrupt and last month, Victor died.

Which ONE of the following statements is CORRECT?

On Victor's death, part of the trust property will pass to his heirs under his will or intestacy.

The trust must come to an end as one of the appointed trustees has died

On Sam's bankruptcy, her creditors will be able to claim the trust property for it to be shared among her creditors.

The answer is D. The beneficiaries' proprietary interest in the trust property means it is still held on trust for them by trustees, notwithstanding Victor's death and Sam's bankruptcy. A is not correct because on Victor's death, the trust property does not pass to his heirs under his will or intestacy. Even though Victor has a part interest in the legal title, this is merely an administrative interest. In equity, the trust property belongs to the beneficiaries of the trust. Trustees are joint tenants. Therefore, the trust property would have automatically passed by survivorship to the other two trustees. They will continue to act as trustees or can appoint another trustee to replace Victor, so option (B) is not correct. On Sam's bankruptcy, the trust property would not have been shared among her creditors even though she was a part-owner of the legal title. The trust property was not hers beneficially, so (C) is not correct.

Susan created a trust two years ago. She appointed Wayne as the sole trustee, asking him to hold £100,000 on trust for her two children, Emma and William. Last month, Susan discovered that Wayne has spent some of the trust fund buying a car for himself.

Is the following statement TRUE or FALSE?

Susan, as the settlor of the trust, can sue Wayne for the breach of his duty to the trust.

T

True

F

False

The statement is false. Wayne has clearly committed a breach of his duty to the trust; even though he has the legal title to the trust fund, he can only use it for the benefit of the beneficiaries. Buying the car has caused the trust to lose value and he can be made liable for that loss of value and can be sued for this breach. However, it is the beneficiaries, Emma and William, who can bring any action against him rather than Susan. Settlors lose control over trusts after they have been created (unless they appoint themselves to be trustees or reserve powers in the declaration of trust).

John's will created a trust of £100,000 for George if he attains 21. When John died, George was aged 19. Sadly, George died before his 21st birthday.

Will the £100,000 be paid to George's estate?

Yes

No

The answer is no. George's interest was contingent on his attaining 21. This contingent interest failed when he died before attaining 21; he was not entitled to anything and so there was nothing to pass to his estate. The £100,000 will pass on resulting trust back to the John's estate to the residuary beneficiaries under the will.

Susan's will contains the following trust:

"I give £100,000 to my trustees to hold on trust for my husband, Ben for life remainder to my children, Nicholas and Jane."

Susan is alive.

Is the following statement TRUE or FALSE?

Ben, Nicholas, and Jane have vested interests.

T

True

F

False

the statement is false. None of the beneficiaries have vested interests (or any interests at all) because a will has no effect until the testator dies. In the meantime, the testator can revoke or change his will, or the prospective beneficiaries' interests may fail because, for example, the beneficiaries might predecease the testator.

Harriet's (validly executed) will contains the following gifts:

Clause 3 "I give £1,000 to Paul."

Clause 4 "I give the residue of my estate after payment of all debts and legacies to Jenny'".

Which ONE of the following statements is CORRECT?

If Paul's legacy fails to have effect because Paul predeceases Harriet, the £1,000 will pass into Paul's estate. If the gift to Jenny fails to have effect, the residue will pass on Jenny's intestacy.

If Paul's legacy fails to have effect because Paul predeceases Harriet the £1,000 will pass into residue. If the residuary gift fails because Jenny predeceases Harriet, the residue will pass to Jenny's estate.

If Paul's legacy fails to have effect because Paul predeceases Harriet, the £1,000 will pass into residue. If the residuary gift fails because Jenny predeceases Harriet, the residue will pass to Harriet's next of kin on her intestacy.

If Paul's legacy fails to have effect because Paul predeceases Harriet, the £1,000 will pass into residue. If the residuary gift fails because Jenny predeceases Harriet, the residue will pass to Jenny's next of kin on her intestacy.

Answer C is the correct statement. Legacies (such as the gift to Paul in Clause 3) fail if the beneficiary dies before the testator/testatrix. This is called lapse. Legacies which fail pass as part of the residuary gift in the will (the gift to Jenny in Clause 4). If a residuary gift fails because the beneficiary dies before the testator/testatrix and the will does not specify what is to happen, the residue will pass to the next of kin of the testator/testatrix (in this case Harriet).

Jonathan is a trustee holding land (which is let to tenants) and shares on trust for Barbara for life, remainder to her son, Paul who is aged 20 years.

Which ONE of the following statements about this trust is not accurate?

The trust property will produce income in the form of rent and dividends.

The trustee must pay all the income to Barbara

When Barbara dies, the trustee must transfer the trust land and shares to Paul (unless he directs otherwise).

During Barbara's lifetime, she is the sole owner of the equitable interest in the trust property.

D is the only inaccurate statement. Both Barbara and Paul have equitable interests in the trust fund. All the other statements are correct.

In the term "certainty of objects", which ONE of the following most clearly describes the meaning of the word "objects"?

The trustees.

The reasons or motives behind the settlor/testator's decision to create a trust.

The beneficiaries, or, in the case of a discretionary trust, the potential beneficiaries.

The chattels, or things, the settlor/testator is making into trust property

The answer is C. The term "objects" equates to the (already chosen) beneficiaries of a fixed trust and the (potentially chosen) beneficiaries of a discretionary trust.

Which ONE of the following instructions would be sufficient to create a trust?

In his will, the late Robert Carol provided:-

'I give my art collection to George Carol, hoping that he will give a painting to each of my children.

'I give my art collection to George Carol and express the wish that he will give a painting to each of my children.'

'I give my art collection to George Carol, trusting that he will give a painting to each of my children.

'I give my art collection to George Carol to distribute a painting to each of my children.'

The answer is D. A trust can be created even if the settlor does not use the word 'trust'. Settlors have an intention to create a trust if they impose a duty on the trustee to deal with the property in a certain way. 'To distribute' imposes a duty on George to give a painting to each child. The other options contain precatory words which do not create trusts (Re Adams and the Kensington Vestry).

Which ONE of the following is MOST LIKELY to fail due to uncertain subject-matter?

£100,000 to be held on trust for my children equally.

£100,000 to be held on trust for my children

£100,000 to my trustees to hold on trust for such of my children and in such shares as my Trustees think fit.

A will gives trustees 'the residue of my estate on trust to give my children the amounts which they deserve

The answer is D. Here, the trust property is 'residue'. This is what is left of the estate after debts and legacies have been paid and it is certain. However, the beneficiaries' respective interests ('the amounts which they deserve') are uncertain and no discretion is given to the trustees. Therefore, D is likely to fail due to uncertainty of subject-matter. In A, the trust property is £100,000, which is certain, and there is a formula for working out the children's beneficial interests ("equally"). In B, nothing is said about the size of each the child's interest, but where property or money is held on trust for a group of people and nothing is said about their shares, they are assumed to share equally. C is a discretionary trust where the trustees decide on the extent of each beneficiary's share.

Sami wants to transfer £10,000 to Taj to hold on trust for his son, Banjul.

Which ONE of the following is CORRECT to achieve this?

Sami signs a cheque in favour of Banjul and hands it to Taj

Sami signs a cheque in favour of Taj and hands it to Taj.

Sami signs a cheque in favour of Taj and hands it to Taj, telling him to hold it on trust for Banjul.

Sami writes a letter to Taj as follows: "Please hold this cheque for £10,000 on trust for Banjul", but forgets to sign a cheque and so does not include one with the letter to Taj

The answer is C. To create a trust over personalty by transfer to trustee there are two stages. First, the intended trust property must be effectively transferred to the trustee. This was achieved in answers B and C, but not in answers A and D. Second, the trust must be declared i.e., the trustee must be instructed to hold on trust, and the trust property and beneficiary must be clear (the three certainties). Only in option C is there both the necessary transfer of trust property and the required declaration of trust.

At a family meeting, James makes an oral announcement, 'From now on, I am holding all my shares in Delta Diggers Ltd on trust for Kimberley until she has her 21st birthday'. Kimberley is James' nineteen- year-old daughter who is keen to get involved in the family company.

Which ONE of the following statements is CORRECT?

James has not created a valid trust because he has not transferred the trust property to the trustee by stock transfer form and registration of the trustee at the company.

James has not created a valid trust because he should have declared the trust in writing.

James has created a valid trust, but he can change his mind and reclaim the shares.

James has created a valid trust and it is too late for him to change his mind and reclaim the shares.

The answer is D. The first step for you to take when answering a question on validity of a trust is to decide which of the three methods of creating the trust the settlor intended to use. Here, James wanted to declare himself a trustee in his lifetime. The statement made by James satisfies the requirements for a valid declaration (there is certainty of intention, subject-matter, and object as well as compliance with the beneficiary principle and the relevant rule on perpetuity). Lifetime trusts over personalty can be declared orally, so (B) is not correct. A transfer of the shares was not required because James, who will now be the trustee, already holds legal title to the shares, so (A) is not correct. Once a trust has been validly created, it is too late for the settlor to back out, so (C) is not correct.

Nathan wants to declare a trust over his holiday cottage "Seaview" in favour of his nephew Owen, aged 16.

Which TWO of the following will achieve this? (To obtain credit for this question you must identify BOTH correct statements.)

Nathan tells Owen, "I'm holding Seaview on trust for you".

Nathan tells Owen, "I'm holding Seaview on trust for you" and a week later writes a letter to Owen confirming the conversation, signed "Uncle Nathan"

Nathan tells Owen's father "I'm going to hold Seaview on trust for Owen".

Nathan signs a memorandum, "From now on, I'm holding Seaview on trust for Owen".

Both B and D achieve this. The correct formalities for a declaration of trust over land are stated in section 53 (1)(b) LPA 1925. The declaration of trust must be manifested and proved by some writing signed by the person creating the trust (here Nathan) and this signed writing must contain all the terms of the trust. It is sufficient for Nathan to sign as "Uncle Nathan". The declaration may actually be in writing, as in answer D, or an oral declaration subsequently evidenced in writing, as in answer B.

Which ONE of the following clauses found in a will creates a valid trust?

I give my jewellery to Bridget Lloyd trusting that she will give my cousin, Patricia Powell, one of my rings

I give £10,000 to Bridget Lloyd hoping she will give some of the money to Patricia Powell.

I give £10,000 to Bridget Lloyd on trust to be divided equally between my closest friends

I give £10,000 to Bridget Lloyd to be divided equally between my employees.

The answer is D. To be valid, the trust must satisfy the three certainties of intention, subject matter, and objects. The testator has not used the word 'trust' but the phrase, 'to be divided', is sufficiently imperative to suggest certainty of intention. The subject matter is £10,000. The test for certainty of objects depends on the type of trust. This is a fixed trust. Therefore, the complete list test applies. In Re Baden's Deed Trust No 2 it was held that the word, 'employees', was certain.

The attempted trusts in (A) and (B) lack certainty of intention. 'Trusting' and 'hoping' are precatory words which do not create trusts (Re Adams and the Kensington Vestry). In (B), there is also lack of certainty of subject-matter.

The objects are uncertain in (C) - it is a fixed trust and you could not draw up a complete list of 'my closest friends' because the description is conceptually uncertain.

Is this statement TRUE or FALSE?

If the directors of a company create trusts for their new customers and then the company goes into insolvent liquidation, the trusts will be void because they will be unlawful preferences of creditors.

T

True

F

False

The statement is false as it is not entirely accurate. If the company creates trusts for existing customers who are already owed money/goods by the company, then the company is preferring existing creditors, and this is likely to be unlawful. However, where the trust is created for money which customers will send in the future, there is no unlawful preference of creditors because these customers never become creditors; they are beneficiaries under a trust all along (Re Kayford).

Six months ago, Max decided he wanted to give an antique table he owned to his daughter Anna. He told her to collect it from his house. Three months later, Anna had not yet collected the table,so he told another daughter, Becky, she could have it, saying, "Come and collect it this Saturday". Becky never did collect the table. When he died in last month, Max's estate, after paying debts he owed to his creditors at his death, was worth about £35,000 (including the table, worth £5,000). In his will, validly executed three years ago, he appointed Anna as executor, and left everything to his third daughter, Cath.

As executor, Anna asks, "Who gets the table?!"

Which ONE of the following is CORRECT?

Anna

Becky

Cath

Max's creditors

The answer is C, Cath. It cannot be D, his creditors, because Max died with enough to satisfy them, his estate still being worth £35,000 after all the debts has been paid. It is not B, Becky because Max intended to make a lifetime gift to her of a chattel, which requires delivery. There might have been a perfected gift to her had there been delivery, but this did not occur as she never took possession of the table. There is a possible perfect lifetime gift to A, Anna. As with Becky there was no immediately perfect gift because of the lack of delivery. However, the rule in Strong v Bird can save transfers in similar circumstances. An immediate lifetime gift must have been intended, the intention must continue until death, and the intended donee must become the donor's personal representative. While the intended gift was immediate and Anna has been appointed executor in Max's will, the attempted subsequent gift to Becky indicates a change of mind, negating the original attempted gift to Anna. The result is that the table passes to Cath under the will.

Seatco Ltd has gone into liquidation. It holds many customer pre-payments and will now be unable to fulfil their orders.

In which ONE of the following cases is there likely to be a trust for customers?

Customer Green sent Seatco £2,000 with a covering letter saying that it was to purchase a black leather "Sofia" sofa.

Seatco has spent Customer Green's £2,000 on overheads. It has three black Sofia sofas in its warehouse.

Customer Green stated that the £2,000 was not to be at the general disposal of Seatco but was to be held separately until the sofa was delivered to Green.

Seatco opened a bank account containing £30,000 and called it the "Loyal Customers' Protection Fund.

The answer is C. In C the customer has indicated that the money is to remain in the customer's beneficial ownership until the goods are delivered and this suggests a trust. In A, there is simply a contract to buy the goods. In B, there is no trust of the money because it has been dissipated. There is no trust of a sofa because there is uncertainty of subject-matter. Which of the three sofas is the subject of the trust? In D, any attempted trust could be void as a preference or due to uncertainty of objects.

Under the terms of a valid will, a woman appointed her son to hold her residuary estate on trust 'for such promising young tennis players living in Wales and in such shares as my son thinks fit'. The woman was a past Chair of a tennis club and grew up in Cardiff. Her residuary estate was made up of money held in various UK bank accounts.

The woman's son asks a solicitor whether this trust is valid. The son wants to carry out the woman's wishes as much as possible and has already put together a list of people who he thinks should benefit from the trust.

Is the trust valid?

Yes, because the son has identified people he thinks would benefit from it.

Yes, because it is not capricious.

Yes, because it is contained in a valid will.

No, because there is insufficient certainty of subject-​matter.

No, because there is insufficient certainty of objects.

Option E is correct. The trust is not valid because it lacks certainty of objects. The trust is discretionary and therefore must comply with the given postulant test. This requires that the description of the class of objects be conceptually certain. That is not the case here. For instance, it is unclear what is meant by 'promising' and 'young' (e.g., does the latter mean people under the age of 16, 18, 21 years or some other age?) The trust therefore fails.

Option A is wrong. Just because the son thinks he knows who might benefit under a trust does not mean that the trust is valid. If the son chooses incorrectly, he will be in breach of trust.

Option B is wrong. Whilst it correctly identifies that the trust is not capricious (there is a discernible link between the woman and the class she wants to benefit), this does not make the trust valid. If the trust is uncertain (as here), the fact that it is not capricious will not save it.

Option C is wrong. Whilst it correctly identifies that the trust is contained in a valid will, this does not make the trust valid. The declaration of trust must satisfy the three certainties (which it does not).

Option D is wrong because a trust over a residuary estate has certain subject-​matter. The residuary estate can be calculated with certainty -​ it is whatever is left over once all debts, taxes and specific legacies have been met. This is not why the trust fails.

Last month, a woman wrote to a banker as follows, 'You will hold my house in Edale for my nephew, who shall become entitled to the house when he reaches the age of 25 years'. The woman executed a TR1 in favour of the banker.

The woman died two weeks ago. In her will (executed five years ago), she appointed the banker to be her executor. Everything in the will was left to the woman's daughter. When going through the woman's belongings, the banker found the TR1 in the hall sideboard in the woman's home. The Land Registry have confirmed that the woman was still the registered proprietor of the house in Edale when she died.

Is the house held on trust for the nephew?

Yes, because the woman executed a valid TR1 to transfer legal title to the banker.

Yes, because the woman made every effort to transfer legal title to the banker.

Yes, because the fact that the banker is the woman's executor in this case constitutes the trust.

No, because the daughter is the sole beneficiary under the woman's will.

No, because the woman failed to transfer legal title in the house to the banker while she was alive.

Option C is correct. The woman tried to create a valid lifetime trust with the banker as the trustee. This would usually require the woman to transfer legal title in the house to the banker while she was alive. However, as an exception to the rule that 'equity will not assist a volunteer', equity can constitute this trust using the rule in Strong v Bird. This is because the woman intended to create an immediate trust; that trust was not immediately created due to a failure to comply with a relevant transfer rule; there is nothing to suggest that the woman's intention did not continue up to her death; and the banker acquired legal title to the trust property by becoming the woman's executor.

Option A is wrong. The mere execution of a TR1 is not sufficient by itself to transfer legal title in land.

Option B is wrong. In order to satisfy the every effort test, the woman would have had to put relevant documents beyond recall, i.e., she would have had to send the TR1 to either the banker or the Land Registry. She did neither.

Options D and E correctly set out what the general position should be given that the woman failed to transfer legal title to the house during her lifetime. However, given that the nephew can rely on the rule in Strong v Bird to constitute the trust in his favour, neither statement represents the best advice on the facts.

During his lifetime, an accountant wrote a letter to a teacher, in which he said, 'I have decided to give you my holiday home in Bowness-​on-​Windermere. I would like you to think of giving this home to your daughter when she reaches the age of 18 years'.

The daughter is now aged 18 years. She has found a copy of the letter and she says that she is entitled to the home in Bowness-​on-​Windermere. The teacher fell out with his daughter two years ago. The teacher does not want to transfer the home to his daughter.

Must the teacher transfer the home to his daughter?

Yes, because there was a trust over the home in the daughter's favour and, having reached the age of 18 years, the daughter is now entitled to the home.

Yes, because the accountant has identified the home and the daughter with sufficient certainty.

Yes, because the accountant created an express trust in favour of the daughter and that trust was manifested and proved in signed writing.

No, because what the accountant said in this letter did not amount to a trust in favour of the daughter as there was insufficient certainty of intention.

No, because the daughter is too young to hold legal title in land.

Option D is correct. What the accountant says is not sufficient to give rise to a trust, i.e., there is no certainty of intention. He used precatory wording -​ 'I would like you to ...'. There is no binding obligation on the teacher to give the home to his daughter. When the accountant transferred the home to the teacher, the teacher became the absolute owner of the home.

Option A is wrong. As the accountant's letter did not declare a trust over the home, the age of the daughter is irrelevant.

Option B is wrong. Whilst the accountant did identify the home and the daughter with sufficient certainty, a declaration of trust needs to comply with all three certainties and, in this case, there is no certainty of intention. The daughter therefore has no interest in the home.

Option C is wrong. The accountant's letter did not declare a trust over the home (for the reasons set out above).

Option E is wrong. A person aged 18 years or over can hold a legal estate in land.

During a telephone conversation with a friend, a manager asked the friend whether she would look after her flat in Nottingham and transfer that flat to her friend's son when he turned 25 years of age. The son is currently aged 15 years. The friend agreed.

The manager then wrote to a solicitor who was looking after the manager's affairs. The manager advised the solicitor that, going forward, the friend would 'hold my flat in Nottingham on trust'.

Which of the following statements best describes why the trust is not enforceable?

The trust is not enforceable because during the telephone conversation with the friend, the manager never used the word 'trust'.

The trust is not enforceable because there is no certainty of subject-​matter.

The trust is not enforceable because the manager cannot delay the son's entitlement to the flat beyond the age of 18 years.

The trust is not enforceable because the manager must have written to the friend to record that the flat would be transferred to the son.

The trust is not enforceable because the manager has not set out all the material terms of the trust when writing to the solicitor

Option E is correct. The manager is attempting to create a trust over land. She must therefore comply with the requirements of s 53(1)(b) of the LPA 1925, namely that the declaration of trust must be evidenced in signed writing. The letter to the solicitor does not satisfy this formality, as it does not record the material terms of the trust. For instance, it does not identify who is the beneficiary under the trust and when his interest will vest. The trust therefore is unenforceable.

Option A is wrong. Just because the manager did not use the word 'trust' when speaking to the friend does not make the trust unenforceable. It is clear from the wording she used that a trust was intended. The friend had to look after the flat and then distribute it to someone else. This describes the classic role of a trustee.

Option B is wrong. Assuming that the manager has only one flat in Nottingham (and there is nothing to suggest that this is not the case), then there will be sufficient certainty of subject-​matter. Objectively speaking, we know what property will be held under trust.

Option C is wrong. The manager can delay the son's entitlement to the flat, so long as she does not offend the rule against remoteness of vesting. Given that the son's interest will vest after 10 years, this is not an issue.

Option D is wrong. Whilst s 53(1)(b) of the LPA 1925 requires that the manager record the material terms of the trust in signed writing, she does not need to send that written record to the friend (although clearly such a course of action would be prudent). Had the letter to the solicitor set out all the material terms of the trust, that would have been sufficient.

An artist writes a letter to her brother saying, 'The two of us shall be trustees over the sum of money in my savings account for your daughter until such time as your daughter marries or turns 30 years of age (whichever is the earliest), when it will become hers'. The daughter is aged 21 years.

The artist dies two weeks later. The artist had taken no steps before her death to put the money into a joint bank account in the names of herself and her brother. In her will, the artist named the daughter as the executrix of her estate.

Which of the following statements best describes why the money in the savings account belongs beneficially to the daughter?

The money belongs beneficially to the daughter because the letter is a valid declaration of trust and it would be unconscionable for the trust not to take effect.

The money belongs beneficially to the daughter because the letter comprises a deed of transfer of that money to the brother, which constitutes the trust.

The money belongs beneficially to the daughter because the letter demonstrates that the woman made every effort to constitute the trust

The money belongs beneficially to the daughter because of the rule in Strong v Bird.

The money belongs beneficially to the daughter because the trust had already self-​constituted prior to the artist's death

Option A is correct. The artist intended to create a trust with herself and her brother as trustees. Ordinarily, the artist in this situation would have had to take whatever steps were required to put the legal title to the money into the joint names of herself and her brother. However, having made a valid declaration of trust, it would have been unconscionable for the artist to back out of constituting the trust. As a result, the trust is valid in equity and the money belongs beneficially to the daughter.

Option B is wrong. The letter is not a deed (as it will not have been witnessed by a third party) and is not sufficient to constitute the trust.

Option C is wrong. The letter is not sufficient to satisfy the every effort test. The artist needed to take steps to open a joint account in the name of herself and her brother and transfer the money from her savings account into that joint account. The every effort test generally only applies in cases where land or company shares are being transferred.

Option D is wrong. The fact that the daughter is appointed to be the executrix is irrelevant to the operation of the rule in Strong v Bird. In order to constitute a trust using this rule, it is the trustee who must be appointed the executor/​executrix, not the beneficiary.

Option E is wrong. The only trusts which self-​constitute are those where the settlor appoints only themselves to be the trustee. This is not that kind of trust

Last month, having taken legal advice that he should start to transfer some of his wealth to lower his potential future inheritance tax bill, a man telephoned an ex-​colleague to say, 'I would like you to have my shares in Wright Stuff Limited in case you want to give some for such of my friends that stood by me whilst I was having treatment for my cancer and in such shares as you think is right'. Following the call, the man executed a stock transfer form over his Wright Stuff Limited shares and sent this to his ex-​colleague together with his share certificate. The ex-​colleague forgot to tell the man during the call that she was about to take her children on a long holiday to Florida, so was not around when the documents arrived at her house.

Last week, the man died. In his will, he appointed a solicitor as his executor and left his estate to the ex-​colleague. The ex-​colleague cut short her holiday to find the documents relating to Wright Stuff Limited on her doormat.

Do the shares belong absolutely to the ex-​colleague?

Yes, because what the man said over the telephone did not satisfy the test for certainty of intention.

Yes, because although the man wanted to create a trust, he failed to manifest and prove the declaration of trust in signed writing.

Yes, because although the man correctly declared a trust, he failed to constitute that trust during his lifetime.

No, because the man satisfied the every effort test and the shares are therefore held on trust.

No, because the man clearly intended that the ex-​colleague hold the shares on trust for other people.

Option A is correct. Objectively speaking, the man intended to gift the shares to the ex-colleague. The rest of the wording - 'in case you want to give some shares' - is precatory wording only and evidences no intention that the ex-colleague should hold the shares on trust for other people. As there was no lifetime trust, the ex-colleague takes the shares absolutely. (It should be noted that there are also problems with other certainties of subject-matter and objects.)

Option B is wrong. As the trust is one of personalty (anything other than land), the declaration of trust does not need to be manifested and proved in signed writing. This requirement only applies to declarations of trust over land.

Option C is wrong. There was no trust to constitute.

Option D is wrong. Whilst this option correctly applies the every effort test, it fails to consider the fact that the trust cannot be valid due to the imperfect declaration of trust. (Had the declaration of trust been valid, the man would have satisfied the every effort test. The man executed all the documents that were required and put all documents beyond recall by sending them to the ex-​colleague. He had done everything he could to transfer legal title to the shares while he was alive.)

Option E is wrong. The man may have hoped that the ex-colleague might distribute shares to other people, but ultimately there was insufficient intention to create a trust over those shares.

Three months ago, the directors of a company opened a new company bank account as part of a new sales promotion. The name of the account was the X24 Customer Account. The account was to protect the deposits of customers who were required to pay for their goods in advance of delivery. The company has received £2,000 deposits from twenty different customers since the account was open. Due to an error in the company's accounts department, the deposits were paid into the company's Supplier Account rather than the X24 Customer Account. The company has just gone into liquidation before delivering any of the goods and there is still £40,000 in the Supplier Account.

Are the customers likely to be able to recover their deposits in full?

No, because the customers were given priority over other creditors with the creation of the account.

No, because the deposits were not paid into the correct account and so there is no certainty of subject-matter for any intended trust.

No, because only secured creditors of the company can recover in full.

Yes, because the directors intended to create a trust when they opened the account, and the company retains the money paid by the customers

Yes, because any advance deposit paid by a customer can be recovered.

Option D is correct. Re Kayford established that it is possible for directors to open a ring-fenced account as a trust in relation to customer deposits. Whilst the word 'trust' does not appear in the title of any bank account, the directors' actions can be sufficient to create a trust. By opening the separate account in the first place, the directors showed that the money received was not to be at the free disposal of the company, sufficient to reveal an intention to create a trust. The fact that the customer deposits were not actually paid into the correct account due to administrative error is immaterial (Re EVTR) and the balance in the Supplier Account indicates that the customers' deposits have been retained.

Option A is wrong because the trust would not be an unlawful preference of creditors under s239 Insolvency Act 1986 as under Kayford the customers were never creditors; they were beneficiaries under a trust all along.

Option B is wrong because payment of monies into a separate bank account is useful (Kayford), but not conclusive. There are likely to be clear records to identify the customers who paid the deposits (given the numbers involved) and so there will be certainty of object and subject-matter (each paid £2,000) of the moneys received.

Option C is wrong because while secured creditors are more likely to recover their debts in full, if an unsecured creditor can establish a trust, they may also be able to recover their debt in full as a beneficiary of that trust.

Option E is wrong because a customer will have to evidence that any advance deposit they have paid is being held on trust for them. In the absence of any trust, the customer will merely be an unsecured creditor.

Three years ago, an estate agent sent a letter, enclosing a cheque for £10,000, to a paramedic that said, 'As agreed, cash this cheque and give most of it to your daughter and then the rest to your son when they reach the age of21years'. The daughter was then aged 18 years and the son was aged 12 years. The paramedic cashed the cheque.

The daughter has now reached the age of 21 years and has found the letter. She wants the paramedic to transfer at least a half share of the money to her (she has not discussed this with her brother). The estate agent has recently fallen out with the paramedic and has written to the paramedic demanding that she return the money to him.

Must the paramedic return the money to the estate agent?

Yes, because whilst the estate agent tried to create a trust in favour of the paramedic's children, that trust failed due to uncertain intention.

Yes, because whilst the estate agent tried to create a trust in favour of the paramedic's children, that trust failed due to uncertain subject-​matter.

Yes, because whilst the estate agent tried to create a trust in favour of the paramedic's children, the trust offended the relevant perpetuity rules

No, because the daughter has reached the age of 21 years and her entitlement to the money has vested.

No, because the estate agent created a valid trust. Given that the declaration of trust did not specify the shares that each child would get, the law presumes that each child gets an equal share

Option B is correct. The estate agent tried to create an express trust. The reason that trust is ineffective is due to the beneficial interests being uncertain (which is an aspect of the second certainty -​ certainty of subject-​matter). The paramedic does not know how to separate the trust property between the daughter and son. All she knows is that she must give the daughter more than the son, but beyond that the distribution between the two is unclear. The paramedic therefore holds the legal title in the money on resulting trust for the estate agent. As that resulting trust is a bare trust and the estate agent is absolutely entitled, he can call for that money back.

Option A is wrong. There is certainty of intention -​ it is clear that the paramedic had to hold the money on trust for other people.

Option C is wrong. Had the trust been valid, the contingent interests were clearly capable of vesting within the perpetuity period of 125 years (being the perpetuity period relevant to trusts for individuals).

Option D is wrong. As the express trust fails, the daughter has no beneficial interest in the money, whether she reaches the age of 21 years or not.

Option E is wrong. This is not a case where the law can presume that each person should get an equal share as this runs counter to the estate agent's intention in setting up the trust (the only thing we know for certain is that he wanted the daughter to get more than the son).

Which ONE of the following is VOID because it offends the beneficiary principle?

'On trust to advance equality and diversity in the United Kingdom'.

'On trust to improve the standard of politeness in the town of Reading.'

'On trust to build a swimming pool for use by the employees of Geronimo Ltd.'

'On trust to maintain my horse, Flash, for 21 years after I die.'

The answer is B. This is a purpose trust with no ascertainable beneficiaries (and a purpose that is not charitable). A is charitable (s3(1)(h) Charities Act 2011) and therefore, is not subject to the beneficiary principle. In C, the employees are ascertainable beneficiaries who could enforce the trust (Re Denley). D is an exception to the beneficiary principle (Re Dean).

A testator's will contains a legacy of £100,000 on trust to be spent on such benevolent and philanthropic purposes as my trustees think fit. Benevolent and philanthropic purposes are not charitable.

Which TWO of the following statements are correct? (To obtain credit for this question you must identify BOTH correct statements).

The trust is void because it offends the rule against inalienability.

The trust is void because the purpose is uncertain

The trust is void because it has no ascertainable beneficiaries and therefore offends the beneficiary principle.

The trust is a valid discretionary trust.

The answers are B and C This is a purpose trust which is generally void unless is qualifies as a charitable purpose trust (which you were told it did not) or it satisfies all the requirements under Re Denley. Here the purpose is vague, and no identifiable group of people will receive a tangible benefit from the purpose. A is not correct; this trust does not offend the rule against inalienability because the terms of the trust allow the trustees to spend the capital on the purpose. D is not correct as this is not a trust intended to benefit a class of specific individuals. The trustees are instructed to do something with the trust fund. It is a purpose trust.

A valid will includes the following provision: "I give my shares in Morris Ltd to my executor on trust to use the income to provide tuition in choral singing for anyone living in Manchester."

Which ONE of the following statements is CORRECT?

The trust will not succeed as a charitable purpose trust because it does not satisfy the rule against inalienability of capital.

As singing is not a charitable purpose, the provision cannot be valid as a charitable purpose trust.

The trust will be valid as a charitable purpose trust as there is public benefit to a sufficient section of the public.

The trust will be valid as a non-charitable purpose trust.

The answer is C. A charitable purpose trust must have an identifiable charitable purpose which it does (advancement of education), and it must be for the public at large or a sufficient section of the public. There is no personal nexus, and the class description is potentially wide enough; inhabitants of a large city such as Manchester would be sufficient. A is not correct because the rule against inalienability does not apply to charitable purpose trusts. B is not correct because this purpose would probably fall within the advancement of education (or the advancement of the arts, culture, heritage, or science, a charitable purpose within s3 Charities Act 2011). D is not correct because the clause provides that only income is to be used and gives no end to the trust within the (21 year) perpetuity period. This will not succeed as a non-charitable purpose trust because of the rule against inalienability of capital.

In Barclays Bank v Quistclose, the House of Lords decided that the lender had lent the money on trust to pay the dividends to shareholders but, if this could not happen, on a secondary trust for the lender

What facts indicated that the lender displayed certainty of intention to create a trust?

Choose ONE of the following answers.

The lender lent the money expressly "on trust" to pay the dividends.

The bank opened a new bank account for the money.

The lender lent the money for the sole purpose of paying dividends.

The lender wanted to give the shareholders an equitable interest in the money.

C is the correct answer. The fact that the money was lent for an exclusive purpose meant that the borrower was not free to spend the money in any way it pleased; according to the House of Lords this indicated that a trust was intended. Answer A is wrong because the words "on trust" did not appear in any of the correspondence detailing the purpose of the loan. In any event, an intention to create a trust can be evidenced by words or conduct (Paul v Constance). Answer B is wrong because the intention of the settlor (the lender) is what counts not that of a third party. Option D is wrong because the intention of the settlor was to protect its own money by way of a trust until the shareholders received the dividend.

The class of people who can benefit from a charitable purpose trust can be limited, provided the limits are justifiable given the nature of the purposes of the trust itself.

Is this statement true or false?

T

True

F

False

The statement is true. It is not necessary for a charitable purpose to benefit the whole public. A benefit which accrues to a sufficiently large section of the public will be acceptable. What is a sufficiently large section of the public varies according to the purpose of the trust. Any limitation must be legitimate and proportionate. A personal nexus between the people benefiting from the purpose or arbitrary limitations which give rise to a class within a class are not sufficiently large sections of the public.

Which ONE of the following offends the rule against inalienability?

A trust to buy sports equipment for use by the employees of Mega Co.

A trust to maintain the Griffiths family tomb in Hartford cemetery.

A trust to provide annual summer parties for students and staff at the University of Law for as long as the law allows.

On trust to invest the capital and use the income to pay for the education of the children of the Herbert family for the next 15 years

The answer is B. The rule against inalienability invalidates a trust if the trust capital cannot be spent within the perpetuity period. Option B offends the rule against inalienability because the trust is for a continuing purpose which is to last indefinitely. In B, the capital would be invested indefinitely to produce the income to fund the maintenance. A does not offend the rule because the capital can be spent once and for all on purchasing the sports equipment. C and D are valid because they are expressly confined to the perpetuity period.

When considering whether a trust is valid as a non-charitable purpose trust under the principle from Re Denley, which ONE of the follow statements is CORRECT?

The trust only needs to provide a tangible benefit to an ascertainable group of beneficiaries to be valid.

A non-charitable purpose trust could be valid under the principle from Re Denley provided the group of beneficiaries receiving a tangible benefit from the purpose are not linked by a personal nexus.

For a trust to be valid under the principle from Re Denley, there must be certainty of both the purpose and objects.

Unlike trusts intended to benefit specific individuals, a non-charitable purpose trust does not have to consider the issue of perpetuity

To be valid under Re Denley, a non-charitable purpose trust must satisfy all the required four elements. Therefore, the answer is C. There must be a group of ascertainable people who will receive a tangible benefit from the purpose. That group of people must be described with sufficient certainty. (It is thought the relevant test is the given individual test requiring conceptual certainty.) The purpose must also be described with certainty, so the trustees know what they are expected to do. A is not correct because there are other conditions which must be satisfied under the principle from Re Denley - compliance with the rule on alienability and certainty of purpose and objects. B is not correct as personal nexus is not a relevant consideration for non-charitable purpose trusts. It is only relevant when considering public benefit matters in charitable purpose trusts. D is not correct as a non-charitable purpose trust must also satisfy the perpetuity rule on inalienability - the purpose must be capable of being fulfilled on a one and for all basis or the trust will come to an end in 21 years.

A trust "for the relief of poverty" is void for uncertainty of object and because it offends the beneficiary principle.

Is this statement TRUE or FALSE?

T

True

F

False

The statement is false. The "relief of poverty" is a charitable purpose (s3(1)(a) Charities Act 2011) and such a purpose is accepted as being for the public benefit. Such a trust would, therefore, be charitable; charitable trusts are not subject to certainty of object rules or the beneficiary principle.

To be valid, a trust must have a beneficiary to enforce it. According to Lord Millet tin Twinsectra v Yardley, who were the beneficiaries of the Quistclose trust?

The sharehiolders.

The borrower.

There are no beneficiaries in a Quistclose trust

The lender.

The answer is D. In Twinsectra, Lord Millet examined where the beneficial interest of the trust might be pending the application of the loan for the purpose. Having rejected various options as unconvincing he stated that the Quistclose trust was "an entirely orthodox example of the kind of default trust known as a resulting trust. The lender pays the money to the borrower by way of loan, but he does not part with the entire beneficial interest in the money, and in so far as he does not it is held on a resulting trust for the lender from the outset. The borrower who has a very limited use of the money, being obliged to apply it for the stated purpose or return it. He has no beneficial interest in the money, which remains throughout in the lender subject only to the borrower's power or duty to apply the money in accordance with the lender's instructions".

A valid will contained the following provision:

"I give £100,000 to my trustee to be held on trust for as long as the law allows to provide grants to children of employees of X Industries Ltd who go to university."

Which of the following statements best explains why the provision will be valid or not?

The trust will be void as a purpose trust because it lacks certainty of object.

The trust will be void because this is a purpose trust, and it does not satisfy the rule on alienability.

The trust will be void because it lacks sufficient public benefit.

The trust will be valid because the children of the employees of X Industries will be able to enforce it.

The trust will be valid because advancement of education is a charitable purpose.

The correct answer is Option D. The children derive sufficient tangible benefit from the purpose. Both they and the purpose are sufficiently certain (Re Denley). The children will, therefore, have standing to enforce the purpose so satisfying the beneficiary principle. The provision will therefore be valid as a non-charitable purpose trust.

Option A is wrong because there is both certainty of object in the description of the group of people to benefit from the purpose (children) and the purpose itself is sufficiently certain.

Option B is wrong because the wording of the trust indicates that the trustees can spend the capital on the purpose and the trust is only to last as long as the law allows. Therefore, it will not offend the rule against inalienability.

Option C is wrong because although the trust will not succeed as a charitable purpose trust because it lacks public benefit (there is a personal nexus of employment between the people benefiting from the purpose, Oppenheim v Tobacco Securities Trust), the trust could be valid as a non-charitable purpose trust (Re Denley).

Option E is wrong because although the advancement of education is a charitable purpose within the Charities Act 2011, this provision will not be valid as a charitable purpose trust. However, it will be valid as a non-charitable purpose trust, given the tangible nature of the educational benefit to the children.

Which of the following is likely to be valid as a purpose trust?

"I give £500,000 to my Trustee to invest and use the income to relieve poverty among my relatives."

"I give £200,000 to my Trustees to hold on trust to campaign for the demilitarisation of the United Kingdom."

"I give £10,000 to my Trustees to hold on trust to maintain my horse, Bertie."

I give the residue of my estate on trust for charitable and other purposes related to improving health in Wales."

"I give £175,000 to my Trustees to build and maintain a fitness gym for the staff of Acme plc and their families."

the correct answer is Option A. This is a purpose trust which can be valid as a charitable purpose trust. It is for a charitable purpose - relief of poverty s3 CA 2011. It is exclusively charitable and satisfies the public benefit requirement - relief of poverty is accepted as being of general benefit and there is an identifiable benefit for the public or a sufficient section of the public. The personal nexus test does not apply to poverty (Dingle v Turner) and trusts for poor relations have been accepted - Re Scarisbrick - as charitable. As a charitable purpose trust, the rule against inalienability does not apply, so the fact that the trustees cannot spend the capital (only the income can be used) and it is not limited to 21 years or less does not impact its validity.

Option B is wrong because this is a purpose trust which cannot be charitable because it is political, campaigning for a change in the law (McGovern v AG). It cannot succeed as a non-charitable purpose trust because there are no ascertainable beneficiaries who would derive a sufficiently tangible benefit to be able to enforce the trust. Any benefit to individuals is too abstract to give them locus standi to enforce the trust (Re Denley). Therefore, it is void because it offends the beneficiary principle (Morice v Bishop of Durham).

Option C is wrong because although trusts to maintain specific animals are an exception to the beneficiary principle (Re Dean), the trust must still comply with the rule against inalienability. There are no words (i.e., "for as long as the law allows) which limit the trust lasting no more than the permitted period of 21 years.

Option D is wrong because this trust is not exclusively charitable - 'charitable or other purposes' suggests that the other purposes are not charitable. The trust as a whole is not charitable and is unlikely to succeed as a non-charitable trust due to uncertainty of purpose and non-compliance with the beneficiary principle.

Option E is wrong because this trust cannot be a charitable purpose trust as it lacks public benefit - there is a personal nexus (employment) between those intended to benefit from the purpose. It cannot succeed as a non-charitable purpose trust; although the staff and their families are identifiable as receiving a tangible benefit from the purpose (Re Denley), there is an on-going obligation to maintain the gymnasium once it has been built. There is no time limit to this obligation which means the trust does not comply with the rule against alienability.

A man's will trust contains the following provisions:

'Clause 8: I give £25,000 to my Trustees to maintain the changing rooms and shower blocks at the Rushcliffe swimming club's site in Nottingham ...

Clause 12: Following the payment of my debts, funeral expenses, all gifts under this will and inheritance tax, whatever remains shall belong to my wife.'

The Rushcliffe swimming club is a non-charitable organisation.

Does clause 8 create a valid trust?

Yes, because it satisfies the three certainties.

Yes, because the members of the Rushcliffe swimming club can enforce its terms.

No, because the Trustees are holding the money to achieve a purpose, and all-purpose trusts are void.

No, because the Rushcliffe swimming club is not a charity.

No, because the trust locks capital away for too long.

Option E is correct. The testator has tried to create a non-​charitable purpose trust. Clause 8 can overcome the beneficiary principle -​ the trust provides a clear and tangible benefit for an ascertainable group of individuals (the members of the swimming club). However, as the Trustees must maintain the changing rooms and swimming blocks, which is an ongoing obligation, the trust capital might be locked away in perpetuity. The trust is therefore void for offending the rule against inalienability of trust capital. The trust fund (£25,000) will therefore fall into residue for the benefit of the wife.

Option A is wrong. Whilst this option correctly identifies that clause 8 satisfies the three certainties, that is not by itself sufficient to create a valid trust. As clause 8 is seeking to create a purpose trust, the declaration of trust must overcome the beneficiary principle and the rule against inalienability of trust capital. It does not overcome the latter.

Option B is wrong. Whilst this option correctly identifies that the trust can overcome the beneficiary principle (as the members of the swimming club can enforce its terms), that is not by itself sufficient to create a valid trust. As this trust is non-​charitable, clause 8 must not offend the rule against inalienability of trust capital. Unfortunately, it does.

Option C is wrong. Not all-purpose trusts are void -​ some are, but many are effective.

Option D is wrong. Just because the club is not a charity does not mean that the trust must be void -​ some non-​charitable purpose trusts can be effective

A woman's will contains the following provisions:

'Clause 3: I give £200,000 to my Trustees to educate the young people of Cornwall about the importance of water safety ...

Clause 17: Following the payment of my debts, funeral expenses, all gifts under this will and inheritance tax, whatever remains shall belong to The British Red Cross Society.'

Which of the following statements provides the best advice to the Trustees about clause 3?

Clause 3 does not create a valid trust because 'the young people of Cornwall' is not conceptually certain.

Clause 3 dos not create a valid trust because the purposes are not exclusively charitable.

Clause 3 does not create a valid trust because the section of public who will benefit from the purpose are bound by a personal nexus.

Clause 3 creates a valid trust because the purposes are charitable, and the benefit accrues to a sufficiently large section of the public.

Clause 3 creates a valid trust as there is a clearly ascertainable class of people who can enforce the trust.

Option D is correct. Clause 3 creates a valid charitable trust. The purpose (education and/​or the saving of lives) falls within the list of charitable purposes under s 3(1) of the Charities Act 2011; the benefit accrues to a sufficiently large section of the public; and the purposes are exclusively charitable. If the Trustees do not know how to apply the money, they could seek further guidance from the Charity Commission.

Option A is wrong. Whilst this option correctly states that the 'young people of Cornwall' is conceptually uncertain, as they are not the object of the trust (the object is the charitable purpose of educating them about water safety), this is irrelevant.

Option B is wrong. The trust is exclusively charitable. There is no suggestion that the woman wanted the Trustees to engage in political activities.

Option C is wrong. The young people in Cornwall are not linked by relationships to a particular individual or company. Therefore, they are not linked by a personal nexus.

Option E is wrong. The 'young people of Cornwall' is not conceptually certain -​ there will be legitimately different views about when people stop being 'young'. It cannot be said therefore that there is a clearly ascertainable class of people who can enforce the trust. However, option E is also irrelevant given that the trust is charitable.

A valid will contains a series of provisions.

Which of the provisions is likely to create a valid purpose trust?

I give £30,000 to my Trustee to use the income to provide students at Twycombe High School with educational outings to museums around England and Wales.

I give £30,000 to my Trustee to provide annual garden parties for the next twenty-five years for all the students and staff at the Twycombe University.

I give £30,000 to my Trustee to provide a shelter for ill-treated dogs in the Twycombe area and to exert pressure on the authorities to increase penalties for animal cruelty.

I give £30,000 to my Trustee to encourage all my family living in Twycombe to cycle to work.

I give £30,000 to my Trustee to campaign against local government's proposed development of a wind farm in the Twycombe area.

The correct answer is Option A. This would likely be valid as a charitable purpose trust There is a charitable purpose (advancement of education). It is exclusively charitable. Both limbs of public benefit are satisfied - the provision of museum outings would be a benefit and the benefit is to a sufficient section of the public. Here the purpose is for the benefit of the students at a specific high school. Benefits can be restricted to a particular geographical area provided it is not too small (IRC v Baddeley); benefits could also be restricted to the young if the aim of the trust is to educate young people which it appears is what is intended. As a charitable purpose trust, the fact that only income can be used to fund the outings is irrelevant.

Option B is wrong because although the students and staff at the University will derive tangible benefit from the purpose so as to enable them to enforce the trust, the rule against inalienability of capital is not satisfied as the trust is to last longer than law allows.

Option C is wrong because although establishing the shelter could be classed as a charitable purpose (animal welfare), exerting pressure to change the law is political. The purpose is, therefore, not exclusively charitable (Attorney General V McGovern) and therefore not valid as a charitable purpose trust. The purpose also does not succeed as a non-charitable purpose as it is not to maintain a specific dog but relates to general canine welfare.

Option D is wrong because although the purpose might be charitable (advancement of health, or amateur sport), there is insufficient public benefit due to the personal nexus arising from the common family connection (Re Compton). It would not succeed as a non-charitable purpose trust due to the rule against inalienability of capital.

Option E is wrong because this is a purpose trust. The purpose is political (campaigning for a change in the law) so the purpose cannot be charitable. The purpose does not provide tangible benefit to an identifiable group of people to enable them to enforce the trust (Re Denley); it is, therefore, not valid as a non-charitable purpose trust as it offends the beneficiary principle.

A woman executed a trust deed that contained the following provision:

'I give £200,000 to my Trustees to campaign for legislation to promote better standards of behaviour among those occupying public office.'

The Trustees appointed under the trust deed seek legal advice as to what to do with the £200,000.

Is the trust valid?

Yes, because the purpose is charitable.

Yes, because there is sufficient public benefit.

No, because it is not exclusively charitable.

No, because there is no certainty of subject-​matter.

No, because it fails to satisfy the complete list test.

Option C is correct. The trust is not exclusively charitable because the settlor is seeking to change the law, which is a political (not charitable) purpose. Furthermore, the trust cannot work as a non-​charitable purpose trust because there are no ascertainable beneficiaries who will derive a sufficiently tangible benefit to enforce the trust.

Options A and B are wrong. There may arguably be a charitable purpose (e.g., the promotion of citizenship) that is of benefit to the public, but that is not sufficient by itself to make the trust valid.

Option D is wrong. There is certainty of subject-​matter, being the sum of £200,000.

Option E is wrong. The complete list test is relevant when assessing the validity of fixed interest trusts for individuals. It is not relevant here.

A company's main supplier threatened to cease trading with the company because it had experienced delays in payment. The father of one of the directors of the company lent the company £50,000 specifically to pay the supplier. This money was paid into the company's general account at the bank. The company went into liquidation before the money was spent.

Which of the following best explains whether the director's father might be able to recover the £50,000?

He will be unable to recover the £50,000 because he is merely an unsecured creditor of the company.

He will be unable to recover the £50,000 because the company's liquidator will be able to claim the money in priority.

He will be unable to recover the £50,000 because it was paid into the company's general account at the bank.

He may be able to recover the £50,000 because the money was loaned to the company for a specific purpose which can no longer be achieved.

He may be able to recover the £50,000 because he is connected to a director of the company.

Option D is the correct answer. The father could argue that he created a Quistclose trust as the money was lent for an exclusive purpose which can no longer be achieved because of the company's liquidation. In Barclays Bank v Quistclose, money was lent for the sole purpose of paying dividends to shareholders. It was held that the money had been lent on trust for this purpose and, when the purpose could not be carried out, due to the borrower's insolvency, the money should be held on a resulting trust and returned to the lender.

Options A and B are wrong because while the father will rank as an ordinary unsecured creditor on the company's liquidation, if he can establish that the company held the loan money on trust for him, he could recover the £50,000 in full, ahead of the other creditors. As the company would then be holding the money as a trustee, it would not be available to the liquidator.

Option C is wrong because while paying the loan into a separate bank account (as in Quistclose) could suggest that a trust was intended, not doing so is not necessarily fatal to the father being able to establish the trust (Twinsectra).

Option E is wrong because the father's relationship to a director of the insolvent company is not going to impact on his ability to recover the loan.

Which ONE of the following gives rise to the presumption of advancement?

A husband purchases property in the name of his wife.

A grandfather makes a voluntary transfer to his granddaughter on her twenty-first birthday. Apart from the usual seasonal gifts, he has not made any financial provision for her in the past.

A mother provides £20,000 for her son to buy shares in the family's company.

Harry has cohabited with Jenny for 10 years. They have two children. Harry gives Jenny a sports car on the tenth anniversary of their living together.

The answer is A.

In B, C and D, it should be relatively easy to find evidence that the transferor intended a gift but nevertheless, the starting point is a presumption of resulting trust.

Which ONE of the following is MOST LIKELY to give Ann an interest under a resulting trust?

Ann pays the conveyancing fees incurred on the purchase of a house bought in the sole name of her boyfriend, Bob.

Ann has paid the monthly mortgage instalments on a house purchased three years ago in the sole name of her boyfriend, Bob.

Ann pays for a conservatory to be added a house purchased three years ago in the sole name of her boyfriend, Bob.

Ann pays £10,000 towards the deposit on a house purchased in the name of her boyfriend, Bob.

The answer is D. A resulting trust arises when a claimant contributes to the initial purchase price of a house conveyed into the name of another.

A is not correct because conveyancing fees are not considered as part of the payment of the purchase price of the property which could give rise to a trust interest.

B and C are not correct because subsequent payments of mortgage instalments and paying for subsequent works are not relevant when seeking to imply a resulting trust.

Which ONE of the following statements is CORRECT?

Liam gives his son Peter £5,000 as a marriage gift. The marriage is extremely short-lived. There is a resulting trust back to Liam.

Andrew transfers £20,000 to Tom to hold on trust for James if he attains 30 and if he does not, then for Kim absolutely. James dies aged 27. Kim is alive. Tom holds the £20,000 on a resulting trust for Andrew.

Jessica's will contains a legacy of £10,000 to Tim on trust to give Jessica's children "fair amounts". Jessica has died. The £10,000 will be held on a resulting trust.

Kestrell Bank enters into a contract to give Frances a loan of £10,000. Frances spends the money straightaway and then goes bankrupt. There is a resulting trust for Kestrell Bank.

The answer is C. The trust fails because the subject matter is uncertain and, therefore, there must be a resulting trust.

In A, Liam did not create a trust for Peter. It was an outright gift. The marriage was the motive for the gift, no more. The £5,000 belongs to Peter.

In B, the express trust fails because the beneficiary does not satisfy the contingency, but the settlor has said what is to happen in this event. A resulting trust will only arise where a settlor creates an express trust which fails, and there is no direction as to the trust property on such failure.

In D, Kestrell Bank has not created an express trust, and this negates the possibility of a resulting trust. The money was advanced under a contract and the Bank may have contractual rights to recover the loan but cannot claim a resulting trust.

Which ONE of the following statements about common intention constructive trusts is CORRECT?

A constructive trust arises if there was an express common intention that the claimant should have an interest whether or not the claimant acted to her detriment.

A common intention that the claimant should have an interest cannot be inferred.

A common intention that the claimant should have an interest can be inferred from the whole course of dealings.

The whole course of dealings is relevant only to quantifying the claimant's interest under a constructive trust.

The answer is D. The court will not look at the whole course of dealings in order to infer a common intention (so C is not correct). However, the whole course of dealings is relevant to the second stage of quantifying the claimant's interest.

A is not correct because detriment is required as well as a common intention.

B is not correct because the court can infer a common intention from the fact that the claimant contributed to the purchase price or made a significant contribution to the mortgage payments (Lloyds Bank v Rosset).

Two years ago, Kenneth bought his first home. He had to pay a deposit of 10% of the purchase price and funded the rest of the purchase with a mortgage loan. Kenneth's father, Harry, gave him the money for the deposit.

Which ONE of the following statements is CORRECT?

There was a presumption that Kenneth holds the title to the house on a resulting trust for Harry.

There was a presumption that Harry intended a gift of the deposit money because the presumption of advancement applies to fathers and their children.

There was no presumption either way because of s60(3) LPA 1925.

There were no presumptions because there has been no voluntary transfer nor a purchase in the name of another.

The answer is B. The presumption of advancement applies between father and child.

A is not correct because when a father provides purchase money for his child, the presumption of resulting trust is displaced by the presumption of advancement.

C is not correct because s60(3) LPA 1925 only relates to voluntary transfers of land and this question concerned provision of purchase money.

D is not correct because there has been a monetary contribution by Harry to the purchase of property in the name of another, Kenneth.

When considering how the court quantifies a claimant's interest in a family home under a constructive trust, which ONE of the following answers is CORRECT?

The courts award an interest proportionate to the claimant's financial contribution to the purchase price.

The courts will award the share intended by the parties or, if the parties' express or inferred intention cannot be ascertained, the share which would be fair having regard to the whole course of dealing between the parties.

The courts always award a half share in the property.

The courts award the same share which the claimant would obtain under a resulting trust.

The answer is B. The courts try to discover what shares the parties intended. If the intended shares cannot be ascertained, the court will award shares that would be fair.

A is not correct because the share in the property under a constructive trust need not be in direct proportion to the financial contribution made to the purchase.

C is not correct because, while in jointly owned property the starting presumption is equal shares, this presumption can be displaced (see Stack v Dowden) and in claims involving a solely owned property, if the trust is established, the share will be determined in accordance with the parties' intentions or by the court which may or may not be a half share.

D is not correct because under a resulting trust the share will always be in direct proportion to the financial contribution to the purchase price. This is a significant difference between resulting trusts and constructive trusts.

Which ONE of the following statements about proprietary estoppel is CORRECT?

In claims for proprietary estoppel, the assurance that the claimant has an interest has to be an express statement by the legal owner of the property.

In claims for proprietary estoppel, the claimant's detriment has to consist of the payment of money.

In claims for proprietary estoppel, the court has a discretion over the remedy.

In claims for proprietary estoppel, successful claimants always get the property or interest which was promised.

The answer is C. To bring a successful claim for proprietary estoppel, the claimant must show that they received an assurance that they had, or would have, an interest in property which they relied on and acted to their detriment. If an estoppel is established, the court has a discretion over the remedy and will take account of the expectation and the detriment to reach an outcome which is fair and proportionate

A is not correct because the assurance can be an active assurance or can consist of the defendant standing-by knowing that the claimant is acting to their detriment believing that they have an interest in the property.

B is not correct because the claimant's detriment does not have to be the payment of money. It could comprise refusing jobs, looking after the defendant, or working for low wages

D is not correct because the court will consider whether the detriment the claimant experienced matches the property or interest they expected as a result of the assurances. The remedy is intended to be fair and proportionate and may not be what the claimant was promised.

Bert transfers £30,000 to his solicitor, Samantha, to hold on trust for "those people who have helped my wife and me the most, in equal shares". The trust fails because the objects are uncertain.

Is the following statement TRUE or FALSE?

Samantha holds the £30,000 on resulting trust for Bert.

T

True

F

False

The statement is TRUE. Samantha holds the £30,000 as trustee; it is not her money. As the original trust has failed, it is presumed that the settlor, here Bert, would want the money back. Samantha, therefore, holds the £30,000 on a resulting trust for Bert.

Hayden's will included a legacy of £30,000 to Kristen to hold on trust for "such of my grandchildren as attain the age of 21 and if more than one in equal shares". The will gave the residue to Victoria. Both his grandchildren were killed in a skiing accident when they were 19 and 17, respectively. Hayden has just died.

Is the following statement TRUE or FALSE?

The £30,000 will be held on a resulting trust for Hayden's next of kin under the Intestacy rules.

T

True

F

False

The statement is FALSE. The trust will fail because neither grandchild satisfied the contingency (they both died before attaining the age of 21). Kristen holds the £30,000 as trustee and it is presumed that the money will result back to the estate. However, the £30,000 will be held on resulting trust for Victoria, the residuary beneficiary. The next of kin would only benefit if the will contained no valid gift of residue.

Is this statement TRUE or FALSE?

Once a couple have cohabited for a period of more than ten years, there is a statutory regime equivalent to the Matrimonial Causes Act which determines the parties' affairs when their relationship breaks down.

T

True

F

False

The statement is FALSE. Where a couple are not married (or in a civil partnership), when their relationship breaks down, their affairs are governed by trust law principles. Only married couples and those in civil partnership benefit from a statutory regime in determining who gets what when the relationship ends in divorce or dissolution

Is this statement TRUE or FALSE?

It is only possible to bring a claim for proprietary estoppel over a disputed interest in land.

T

True

F

False

The statement is FALSE. A claim for proprietary estoppel can be brought in relation to a disputed interest in personalty as well as land.

Is this statement TRUE OR FALSE?

A party cannot introduce evidence of their own acts made after a purchase or voluntary transfer to rebut a presumption.

T

True

F

False

The statement is TRUE. A person who wishes to rebut the appropriate presumption following a purchase or transfer cannot use evidence of their actions made after the transaction, only those at the time (Shephard v Cartwright).

Is the following statement TRUE or FALSE?

The courts are more likely to use constructive trusts rather than resulting trusts to determine a cohabitee's share in a home which is in the sole name of their partner.

T

True

F

False

The statement is TRUE. Because of the limitations of the resulting trust, which focuses solely on monetary contributions made contemporaneous to the purchase of the home, courts generally now determine beneficial interests in the family home under common intention constructive trust principles.

Is this statement TRUE or FALSE?

If bringing a claim under proprietary estoppel, when evidencing that they acted to their detriment in reliance upon the assurance given, the claimant must be able to evidence that they have financially contributed to the property in dispute.

T

True

F

False

The statement is FALSE. The claimant's detriment does not need to consist of financial expenditure on the property. The detriment must be substantial, but could be working without remuneration, relocating to a new area so giving up family support and a child's educational consistency, giving up the chance of alternative employment, the provision of medical care.

Is the following statement TRUE or FALSE?

As with express trusts of land, an implied trust of land, whether a resulting or constructive trust, will need to be evidenced in signed writing.

T

True

F

False

The statement is FALSE. Implied trusts of any kind do not need to be evidenced in signed writing (s53(2) LPA 1925).

Is this statement TRUE or FALSE?

Payment of household expenses will never be considered as a contribution to the purchase price when inferring a common intention constructive trust.

T

True

F

False

The statement is FALSE. Lord Bridge's comments in Lloyds Bank v Rosset, suggested that the courts would only infer a common intention from direct contributions to the purchase price (e.g., payment of part of the deposit or a contribution towards mortgage repayments). He doubted whether anything less (such as payment of household expenses) would do. However, it may be possible, in very specific circumstances, for indirect financial contributions such as the payment of household expenses to be sufficient to infer a common intention. The household expenses must be substantial and enable mortgage payments to be met by the legal owner (see Le Foe v Le Foe).

Is this statement TRUE or FALSE?

When looking at the whole course of dealing between the parties to ascertain what beneficial shares under a constructive trust would be fair, the court could consider financial and non-financial factors when considering the parties ownership and occupation of the property.

T

True

F

False

The statement is TRUE. While financial contributions to the property and the relationship would be considered, the court could also consider such things like the advice received when the property was purchased, whether there are children of the relationship, how the parties arranged their finances, the reasons the property was acquired (Stack v Dowden).

A father of two children was the chairman of a private company and the sole owner of all five shares in the company. Three years ago, his children started work in the business, and the father transferred one share in the company to each of them, using the correct formalities. Last year, the father remarried, and he made a will which gave all his estate to his new wife. The father told his new wife that his estate included all five shares in the company including those nominally held by his children. The father has now died.

Which of the following statements best describes the position in relation to the disposal of the shares?

The new wife will be able to claim all five of the shares in the company under the presumption of resulting trusts.

The new wife will be able to rely on the father's will and his statements last year to rebut the presumption of advancement and claim all the shares.

In order to retain the shares, the children will have to rebut the presumption of resulting trust.

The new wife will be able to claim all five of the shares as the contents of the will are conclusive.

When the father transferred the shares to the children, the presumption of advancement applied.

The correct answer is Option E. This was voluntary transfer of the shares from a father to his children; the presumption of advancement, that it was a gift, applies and the children have owned the shares outright since they were transferred.

Option A is wrong because the presumption of resulting trust did not apply to the transfer of the two shares to the children. They were validly given away three years ago. Therefore, the father only owned the three remaining shares at the time of his death.

Option B is wrong because the new wife will be using the evidence to rebut the presumption of advancement which arose three years ago. The will and the statements last year are evidence of the father's own actions and not contemporaneous to the initial transfer. They will not be admissible to support her case (Shephard v Cartwright).

Option C is wrong because the presumption of advancement arose when the transfer was made three years ago, and this works in the children's favour. They have nothing to rebut.

Option D is wrong because the contents of a will are conclusive only in respect of property owned by the deceased at the date of death. Because of the application of the presumption of advancement and the correct transfer of the two shares three years ago, the father only owned three shares in the company when he died, and these are what the new wife will inherit.

Four years ago, a woman bought a house in her sole name with the aid of a mortgage loan but had no other financial assistance. The following year, her boyfriend moved in with her and agreed to spend £40,000 on building an extension to the house, doing a lot of the work himself. The woman admits that she knew that the boyfriend did this thinking he would get some kind of interest in the house. The woman has now asked the boyfriend to leave because he refuses to marry her. The boyfriend is claiming an interest in the house.

Which of the following best sets out the basis upon which the boyfriend should claim that interest?

The boyfriend should claim an equitable interest under a resulting trust.

The boyfriend should claim an equitable interest under an inferred common intention constructive trust.

The boyfriend should claim an equitable interest under the presumption of advancement.

The boyfriend should claim an equitable remedy under proprietary estoppel.

The boyfriend should claim an interest in the house as the couple have lived together for more than two years.

Option D is the best answer. If the woman allowed the boyfriend to spend the £40,000 and work on the extension knowing that he believed he would have an interest in the house as a result, this passive assurance by failing to correct his mistake could be sufficient to establish a proprietary estoppel given that the boyfriend has acted to his detriment. Note that it is not guaranteed that the boyfriend will secure an equitable interest in the house even if his claim for proprietary estoppel is successful (the court having a broad discretion as to the remedy which should be ordered). Nevertheless, this option still represents the boyfriend's best possible claim on the facts.

Option A is wrong because the boyfriend will not get an interest under a resulting trust because he did not contribute money at the time of the purchase.

Option B is wrong because for an inferred common intention, Lloyds Bank v Rosset said there had to be a contribution to the purchase price at the time of the purchase or payment of a substantial number of mortgage installments. Neither occurred here.

Option C is wrong because there has been no voluntary conveyance or the provision of purchase money to give rise to a presumption of advancement, which in any case, does not operate between unmarried couples.

Option E is wrong because unmarried cohabitants have no property rights over the assets of the other merely by virtue of their co-habitation regardless of the length of time involved.

A man bought property with the aid of a mortgage in his sole name. The man and his girlfriend lived at the property for ten years but did not marry or form a civil partnership.

Which of the following is most likely to give rise to a constructive trust in favour of the girlfriend?

The man said to the girlfriend, 'The property will always be somewhere we can both call home.' During the ten years that they lived together, the girlfriend paid three mortgage instalments.

The man said to the girlfriend, 'The mortgage company does not want you on the mortgage because you don't earn enough.' During the ten years that they lived together, the girlfriend paid for all their international holidays together.

The man said to the girlfriend, 'Thanks for paying half the deposit on the property. We'll be joint owners and you'll make a massive profit when we sell.' During the ten years that they lived together, the girlfriend paid all the household bills, and the man paid the mortgage instalments.

The man and the girlfriend did not discuss ownership of the property, but girlfriend thinks that she should have a share because she spent an inheritance of £60,000 on building an extension which has added to the value of the property.

The man and the girlfriend did not discuss ownership of the property, but the girlfriend thinks that she should have a share because she gave up her job to look after the two children whom they had together.

The correct answer is Option C. A constructive trust arises if there is a common intention (express or inferred) that the claimant should have an interest and she acts to her detriment in reliance on the common intention. In Option c, there was an express common intention that the girlfriend should have an interest and her payment of household bills was sufficient detriment (Grant v Edwards).

Option A is wrong as the man's statement arguably was not referring to ownership of the house but just acknowledged the girlfriend's right to live there. In any event, payment of three mortgage instalments is probably not enough for detriment.

Option B is wrong because while the man's statement does provide a reason for why the girlfriend is not on the legal title and this could indicate an express agreement as to ownership - they would both have been legal owners were it not for the lender's position (Grant v Edwards), the payment of all the holidays would not be evidence of detrimental reliance.

Options D and E are both wrong as there was no express common intention and the girlfriend's acts will not lead the court to infer a common intention (Lloyds Bank v Rosset).

A son owned a house. His father came to live with him four years ago. Two years ago, the son and his wife separated. The son was worried that his wife might divorce him and was worried about what that might mean for the house. He therefore transferred the house into the father's sole name. No money exchanged hands between father and son. The son and wife have now reconciled, and no divorce proceedings are ongoing.

Throughout the past four years, the father and son welcomed paying lodgers into the house. The money from these lodgers was only ever paid to the son.

The father has recently died and, in his valid will, left the house to his daughter.

Which of the following statements best describes why the son has a beneficial interest in the house?

The son has a beneficial interest because he continued to live in the house.

The son has a beneficial interest because a presumption of resulting trust arose in the son's favour that has not been rebutted on the facts.

The son has a beneficial interest because a presumption of advancement arose in the son's favour that has not been rebutted on the facts.

The son has a beneficial interest because a resulting trust can be inferred on the facts.

The son has a beneficial interest because a presumption of advancement arose in the father's favour but this has been rebutted on the facts.

Option D is correct. When the son transferred the house into the father's sole name, he was making a voluntary transfer of realty. In most cases, when a son voluntarily transfers property to a father, a presumption of resulting trust will apply. However, the position seems to be different for realty (land); ​ in these cases, it seems that no presumption of resulting trust will apply simply because one party has voluntarily transferred land to another. Having said that, a resulting trust is likely to be inferred in this case, given that the son continued to profit from the income being generated from the house. This additional evidence indicates an intention that the son retained a beneficial ownership in the house even when he transferred the legal interest to his father.

Option A is wrong. The mere fact that you live in a house does not by itself give you a beneficial interest in that house.

Option B is wrong. Whilst there is some doubt, the effect of s 60(3) of the LPA 1925 appears to prevent a presumption of resulting trust arising merely by the fact that one person has voluntarily transferred land to another. This option therefore is not the best description of why the son has a beneficial interest in the house.

Option C is wrong. Whilst a presumption of advancement would have arisen had the father voluntarily transferred land to his son, no similar presumption arises when a son voluntarily transfers land to his father. The transfer is the wrong way round.

Option E is wrong. A father can never benefit from the presumption of advancement. Victorian morality dictates that a father is financially responsible for his children. In the right situations, the presumption of advancement may benefit his children, but never him

Five years ago, a man and his girlfriend were looking for a house that they could move into and call their family home. They found a house they both liked. The man told his girlfriend that he would pay the deposit but asked whether she could pay the conveyancing fees for him because he had forgotten to budget for this. She did so. When they first went to see their solicitor on the purchase of the house, they agreed that the house should be put in their joint names. However, after discussions with the bank to get a mortgage, the bank advised it would be better for the house and mortgage to be in the man's sole name, because his girlfriend had a low credit rating that might make it difficult for them to get mortgage finance. The girlfriend agreed to this.

Over the next five years, the man paid the monthly mortgage instalments. His girlfriend got a job three years ago, and since then she has paid the utility bills and also paid for the expensive work that was done to put in a new bathroom.

The relationship between the man and his girlfriend has now broken down. She has moved out and the man is looking to sell the house

Does the girlfriend have an interest in the house?

Yes, because paying the conveyancing fees gives her an interest in the house under a resulting trust.

Yes, because there was an express understanding that she was to have an interest on which she relied.

Yes, because whilst there was no express understanding that she was to have an interest, the fact that she paid a significant number of utility bills and paid to install a new bathroom means that she will get an interest under a common intention constructive trust.

No, because no trust was manifested and proved in signed writing.

No, because she did not make any payment towards the deposit or the subsequent mortgage instalments.

Option B is correct. The evidence suggests that but for the bank's advice to keep the house in the man's sole name, it would have been registered in the joint name of him and his girlfriend. That can constitute an express common intention that his girlfriend was to have an interest in the home. She has also suffered detrimental reliance in the substantial payments she has made to household improvements and expenses.

Option A is wrong. To give rise to a resulting trust, any contribution must be to the purchase price itself, not to ancillary items such as legal fees.

Option C is wrong. There was an express common understanding that ownership of the house would be shared. In any event, in the absence of such an express understanding, it is unlikely that the payments the girlfriend did make would be sufficient to enable a common intention of ownership to be inferred. There is no suggestion that she made any significant payment towards the mortgage.

Option D is wrong. Whilst it is correct to say that there can be no express trust, because such a trust over land would have to be evidenced in signed writing, it is not correct to say that there cannot therefore be any trust, and a common intention constructive trust will have arisen on the facts. Such implied trusts do not need to be evidenced in signed writing.

Option E is wrong. Given that there was an express common understanding that the house be shared, the court can take a wider view as to what constitutes detrimental reliance beyond those items listed in this option.

A man bought shares in a company. His son's name was listed as the owner of the shares in the company's register of members. The son was aged 25 years. On the same day as the purchase took place, the son emailed the man to say, 'Hi Dad. When I get the share documents, I will send these over to you as agreed. As we also agreed, if any dividends are paid on these shares, I will forward those on to you as well.'

A year later, the man instructed a solicitor to draw up a will for him. He said that the value of the shares had doubled over the last year and that he wanted to leave them to his wife.

Does the man have a beneficial interest in the shares?

Yes, because he paid for the shares.

Yes, because the email from the son a year ago is sufficient to rebut the presumption of advancement that would have otherwise applied.

Yes, because the fact that he instructed a solicitor to draft a will leaving the shares to the wife is sufficient to rebut the presumption of advancement that would have otherwise applied.

No, because the presumption of advancement applies and can never be rebutted.

No, because his name is not listed in the company's register of members.

Option B is correct. The man has purchased shares in the name of his son. Whilst the presumption of advancement applies whenever a father transfers property to, or purchases property for, his child, here there is likely to be sufficient evidence to rebut that presumption. That evidence is the email contemporaneous with the purchase recording an agreement that the man would hold the share certificate (which indicates an intention that the man should continue to have some kind of interest in the shares) and that future dividends would be paid to the man (which indicates some kind of entitlement to the shares). It is likely therefore that the man has retained a beneficial interest in the shares.

Option A is wrong. Just because the man paid for the shares does not necessarily mean that he will retain an interest in them.

Option C is wrong. Whilst the presumption of advancement initially arose on the purchase of the shares, this cannot be rebutted by the instructions the man gave to the solicitor. The man would want to use those instructions as evidence that he retained an interest in the shares. However, evidence of words and conduct after the purchase had taken place would only be admissible against the man's case and could not be used in support of his case. As a result, the instructions to the solicitor are not sufficient by themselves to rebut the presumption of advancement.

Option D is wrong. Whilst it is correct to say that the presumption of advancement initially arose on the purchase of the shares, it is not correct to say that this presumption can never be rebutted. The presumptions of resulting trust and advancement are just presumptions and are often readily rebutted in the light of contrary evidence.

Option E is wrong. Whilst the man does not own legal title to the shares given that his name is not listed in the register of members, he can still own the beneficial interest in the shares.

An elderly aunt asks her niece to move in and look after her. The niece loves her aunt but expresses reservations about whether such a move would be possible. She has a child who goes to school near to where she lives; she works full-​time and there is talk that she might get a promotion. To persuade the niece to change her mind, the aunt promises that when she dies, she will leave the house to the niece. The niece agrees to move in. She provides her aunt with round-​the-​clock care for no pay (other than the aunt meeting all her living expenses), quits her job and takes her child out of school, home-​schooling him whenever there is a free moment.

Eight years later, the aunt dies. The niece finds out that the aunt has left her house to a friend.

Which of the following statements best describes why the niece might have an interest in the house?

The niece should have an interest under a common intention constructive trust arising out of the express understanding that she was to have an interest in the house.

The niece should have an interest under a common intention constructive trust arising out of an inferred understanding that she was to have an interest in the house.

The niece should have an interest because she can establish proprietary estoppel arising out of an active assurance, which automatically guarantees her an interest in the house.

The niece should have an interest because she can establish proprietary estoppel arising out of an active assurance, which means it is likely that she will get an interest in the house.

The niece should have an interest because she can establish proprietary estoppel arising out of a passive assurance, which means it is likely that she will get an interest in the house.

Option D is correct. The aunt actively assured the niece that the house would belong to her, and the niece appears to have relied on that assurance to her detriment. Whilst the court has a discretion about what remedy to award, it is likely that the court will award the niece an interest in the house. (Indeed, on the facts, it is likely that that interest would be an absolute ownership right to the entire house. The court would therefore transfer the house to her.)

Options A and B are wrong. Common intention constructive trusts are used to establish present interests in property (ie when two partners share a house together). They are not used to establish future interests in property, as in this scenario. The niece will need to assert proprietary estoppel. Proprietary estoppel prevents the aunt from backtracking on her assurance that in the future the house will belong to the niece.

Option C is wrong. Whilst proprietary estoppel can be established in this case, that does not automatically guarantee the niece a proprietary interest in the house. The remedy is ultimately within the discretion of the court.

Option E is wrong. The assurance in this case was active not passive. This is not a case where the aunt stood back and allowed the niece to think that she was getting some kind of proprietary interest -​ the aunt had actively suggested this.

A man started to go out with a woman who lived in the same town. The woman was about to buy a house. She paid most of the deposit on the house but needed some help from the man. He agreed to lend her some money, which she repaid the following month. The mortgage was taken out in her sole name.

The man's tenancy came to an end around the same time, and he lost his job. He moved into the house. The woman told the man that although the house was in her name, he should consider the house as much his as it was hers. The man looked for work but could not find a job. The man was therefore unable to make any contribution to the mortgage repayments, the running of the house or any renovations to the house.

The relationship has now come to an end. The man did not marry the woman and there were no children. The woman has put the house on the market.

Does the man have a beneficial interest in the house?

Yes, because he was the beneficiary under an enforceable express trust.

Yes, because there was an express agreement to that effect.

Yes, because he lent the woman money to pay the deposit without which she could not have bought the house in the first place.

No, because no declaration of trust was manifested and proved in signed writing.

No, because the house was in her sole name, which automatically prevents him taking a beneficial interest

Option D is correct. To work out why, we shall first consider why the other options are wrong.

Option A is wrong. The woman's statement to the man that he should consider the house as much his as hers might demonstrate an intention to create an express trust, but as that express trust was to be over land, to be effective it must have been evidenced in signed writing. This has not happened.

Option B is wrong. Whilst there was an express common understanding that the man was to take a beneficial interest in the house, that would only give rise to a common intention constructive trust (or a claim for proprietary estoppel) if he had acted on that understanding to his detriment. There does not appear to be anything on the facts that would constitute detrimental reliance.

Option C is wrong. Whilst a contribution to the deposit can create beneficial interests under an implied trust, lending the money for a deposit does not constitute a 'contribution' for these purposes.

Option E is wrong. Just because the legal title to a home is in the sole name of one partner does not automatically prevent the other partner from getting a beneficial interest in the home.

Option D is therefore the best answer. For the reasons set out above, the man cannot assert an interest under an implied trust (resulting or constructive) or proprietary estoppel, nor can he assert a beneficial interest by way of an express trust. In order to be enforceable an express trust must comply with s 53(1)(b) of the LPA 1925, i.e. it must be evidenced in signed writing. This has not happened.

Which ONE of the following statements is CORRECT?

When trustees exercise a discretion, they must take account of the beneficiaries' wishes.

Trustees must give the beneficiaries reasons if they refuse to exercise a discretion.

Beneficiaries can compel trustees to carry out duties but not to exercise a discretion.

Trustees do not have to exercise a discretion nor consider whether to exercise it.

The answer is C. While beneficiaries can compel trustees to carry out duties (usually by obtaining a court order), they have little or no control over the exercise of trustee powers or discretions.

A is not correct because, while trustees may choose to discuss matters with the beneficiaries as a matter of good trust administration, they do not have to. They do, however, have to act in the beneficiaries' best interests when exercising their discretions.

B is not correct because trustees do not have to give reasons for their decisions. [The exception to this might be where a beneficiary has a legitimate expectation that a discretion will be exercised in their favour and the trustees decide differently.]

D is not correct because trustees must consider from time to time whether to exercise their discretions. Having done so, they are free not to exercise them if they wish (although trustees of a discretionary trust do have a duty to distribute the trust property to the beneficiaries; at some point, they will need to make a choice as to who is to benefit from the trust).

Lionel (an accountant) and Stephen (an artist) are trustees of the Parker family trust. The trust is held for Diana for life, remainder to Martin and Sandra.

Which ONE of the following statements is CORRECT?

The trustees will be subject to the same duty of care when making investment decisions.

The trustees must review the trust investments from time to time and take advice unless they reasonably conclude that it is unnecessary or inappropriate to do so.

The trustees can invest the trust fund in accordance with their own ethical views and preferences about investments.

Because there is a life tenant, the trustees must only produce income from their investment of the trust fund; they do not have to consider capital growth until Diana dies.

The answer is B. Trustees have to take professional advice when investing and reviewing investments unless they reasonably conclude that it is unnecessary or inappropriate (e.g. because the trust fund is small and is being invested in very safe investments or the trustees are investment experts). This may apply here as Lionel is an accountant, but this will very much depend on Lionel's qualifications and area of expertise.

A is not correct because the standard of care in s1 Trustee Act 2000 varies according to the skill, experience and professional qualifications of the trustee. As an accountant, Lionel is likely to be judged to a higher standard.

C is not correct because although, under s3 Trustee Act 2000, trustees can invest as though they were absolutely entitled to the trust fund, their duty is to get the best financial return for beneficiaries. This means setting aside their own social, economic, and political views (unless an ethical concern is likely to yield as good a return as a more dubious investment vehicle).

D is not correct because the trustees must act impartially between all the beneficiaries when investing the trust fund. When investing, they will need to strike a balance between the need for income for the life tenant and capital growth for the remaindermen.

Under Grandmother's will, trust assets worth£90,000 producing £4,500 per annum income are being held for such of three grandchildren Angela (aged 18), Barry (16) and Cathy (14) as attain 21. The will does not vary any of the trustees' statutory powers. Grandmother died in 2013.

Which one of the following statements is CORRECT?

Angela should be receiving £1,500 per annum income.

Angela ought to have been paid half her entitlement, i.e., £15,000, on her 18th birthday

Angela should be receiving £4,500 per annum income.

Angela gets nothing until she reaches 21.

The answer is A. Under s31 Trustee Act 1925, once Angela reached 18, she should be paid the current income from her share of the trust income i.e., one third of £4,500 (not all the income earned by the trust, so C is not correct). The trustees have no discretion over this.

B is not correct because while the trustees could make an advancement of capital to Angela under s32 Trustee Act 1925, this is entirely a matter for their discretion.

D is not correct because while she will only obtain a vested interest in the capital at 21, statute provides for advancements before she is actually entitled.

Vikram and Zara are trustees of the Begum family trust. Vikram wants to retire. There are no relevant provisions in the trust instrument.

Which ONE of the following statements is CORRECT?

Vikram could retire under s39 Trustee Act 1925.

Vikram could retire under s36 Trustee Act 1925 and there would be no need to appoint a replacement trustee.

Vikram could retire under s36 Trustee Act 1925. Zara, as a continuing trustee, and Vikram, if he is willing, would have to appoint a replacement.

Vikram could retire under s36 Trustee Act 1925. Vikram would have to appoint a replacement.

The answer is C. S36 lists various grounds on which trustees can be replaced and retirement is one such ground. If the trust instrument does not nominate the person who should make the appointment, it will be the 'continuing trustees' who, in this case would be Zara (and Vikram if he is willing to join in).

A is not correct because s39 does not apply because, after retiring, Vikram would not leave two trustees.

B is not correct because s36 requires the outgoing trustee to be replaced by the appointment of a new trustee.

D is not correct because Vikram cannot appoint the new trustee on his own.

Trustees are holding on trust for Mina for life, remainder to Chadni.

Is the following statement TRUE or FALSE?

Under s. 32 of the Trustee Act 1925, the trustees may make an advancement of capital to Mina if Chadni consents.

T

True

F

False

The statement is FALSE. The trustees may not make an advancement of capital to the life tenant under s.32 of the Trustee Act 1925 because life tenants are not 'entitled to the capital of the trust property' as required by the section.

Trustees have decided to delegate their investment duties to a financial adviser. They seek your advice on whether they will be liable if the value of the trust fund declines because the adviser is negligent.

Which ONE of the following statements is CORRECT?

The trustees will not be liable for the loss caused by the adviser under any circumstance

The trustees will be vicariously liable for the adviser's negligence.

The trustees will be liable for any loss caused by the adviser because they are not allowed to delegate their investment duties.

The trustees will be liable for the advisor's negligence if they fail to review the advisor's work and this failure causes loss to the trust fund.

The answer is D. Trustees will not be liable for the defaults of an agent unless the trustees have breached their own duties in relation to the appointment of that agent and these breaches have caused loss to the trust. These duties include, inter alia, the appointment being made in writing, the agent being given details of the trust and written guidance from the trustees on how to undertake their investment role, and the trustees regularly reviewing the arrangement and the work of the agent in compliance with the arrangement.

A is not correct because trustees may be liable for the default of the agent if they have breached their own duties in relation to the appointment of that agent.

B is not correct because s23 Trustee Act 2000 provides that trustees are not vicariously liable for an agent's defaults.

C is not correct because the trustees have a power to delegate their investment duties under the Trustee Act 2000.

Beneficiaries are entitled to see "trust documents".

Which ONE of the following statements is NOT CORRECT?

Beneficiaries are entitled to see the document which created the trust

Beneficiaries are entitled to see documents which show how the trust fund is invested.

The trustees are not required to disclose a settlor's letter of wishes to the beneficiaries.

Beneficiaries are never entitled to see documents which record the trustees' deliberations about whether to exercise a power or not.

The answer is D (you were asked to identify the incorrect statement). The statement is not correct because, while beneficiaries are not entitled, as of right, to see documents which show the details of the trustees' decision-making process, they can apply to the court for an order for disclosure (see Schmidt v Rosewood). The court may order the disclosure of the relevant documents if they believe it is in the interest of the proper administration of the trust (for instance, where there is evidence that the trustees are acting in breach of trust).

The document that created the trust as well as details of how the trust fund is invested are classed as 'trust documents" the beneficiaries are entitled to see (A and B are correct statements).

A non-binding letter of wishes from the settlor or testator to the trustees is guidance as to how the settlor/testator would like the trustees to exercise their discretions. As such, it is a document which assists in the trustees' decision-making process; the trustees are not required to disclose it to beneficiaries (C is a correct statement).

Which ONE of the following statements is TRUE?

The settlor is always the person who appoints replacement trustees.

There is no theoretical maximum limit to the number of acting trustees of a private trust of land.

A trustee who remains out of the UK for 10 months can be retired from the trust against their will.

If all the beneficiaries are legally competent, in agreement and collectively absolutely entitled, they can require a trustee to retire.

The answer is D. S19 of the Trust of Land and Appointments of Trustees Act 1996 ("TOLATA") provides that, where no person is nominated by the trust instrument, if these specific circumstances exist, the beneficiaries can direct that an existing trustee retire (and that a replacement trustee be appointed).

A is not correct because while the settlor may have reserved power to appoint replacement trustees going forward, more often than not the settlor does not do so. The appointment is normally made by the "continuing trustees" under s36 Trustee Act 1925.

B is not correct because there is a maximum of four trustees of a trust of land. (There is no theoretical maximum for a trust of personalty, but practically more than two or three trustees will make administration of the trust rather unwieldy.)

C is not correct because a trustee has to remain out of the UK for 12 months before being retired from the trust against their will.

Which ONE of the following is NOT a duty imposed on trustees under general law in relation to their investment of the trust fund?

A duty to consider the suitability of investments and the diversification of those investments.

A duty to ensure that the value of the trust fund does not decrease.

A duty to seek professional advice before investing unless it is reasonable not to do so.

A duty to review investments held in the trust from time to time.

The answer is B. Trustees have to ensure the best financial return in the investment of the trust fund. However, as with all investment, it is possible that the trust investments could fall in value due to market events. The standard of care in relation to investment is such care and skill as is reasonable on the circumstances (s1 Trustee Act 2000). Provided trustees have met this standard of care and complied with their other investment duties under the Trustee Act 2000 in their decision-making process, they will not be held liable for such market fluctuations.

A and D are duties imposed on the trustees under s4 Trustee Act 2000.

C is a duty imposed on the trustees under s5 Trustee Act 2000.

Tracy and Tommy are trustees of a family trust. Tracy is going abroad for six months and wants Jenny to take over the trusteeship for that period. Jenny agrees to do the job.

Is the following statement TRUE or FALSE?

Tracy will have to resign her trusteeship, and Jenny will have to be appointed trustee in her place. When Tracy returns, the reverse will be done.

T

True

F

False

The statement is FALSE. S25 Trustee Act 1925 enables a trustee to delegate the entire trusteeship role to an attorney for a period not exceeding 12 months. Tracy will continue to be a trustee, but Jenny can act as her attorney while Tracy is abroad. Tracy will remain liable to the beneficiaries if Jenny breaches any duty which causes loss to the trust.

Samuel created a trust in 2017 in which he gave £325,000 to trustees to hold on trust for Timothy, Ursula, and Victoria provided they attain the age of 25. The trust did not vary the trustees' statutory powers. Timothy is currently 26, Ursula 21, and Victoria 17.

Which ONE of the following statements is CORRECT?

The trustees have a discretion to apply the trust income and advance trust capital to Timothy.

The trustees must accumulate all the trust income.

The trustees can give Ursula the whole of her share of the trust capital now.

The trustees have a discretion to apply the income for the maintenance, education or benefit of Ursula and Victoria.

The answer is C. S.32 Trustee Act 1925 applies as there is no variation of the statute in the trust. The trust was created after 2014 so the whole of Ursula's share of the trust could be advanced to her (for a purpose that was for her advancement or benefit).

A is not correct because Timothy satisfied the contingency when he attained the age of 25. He is now absolutely entitled to one third of the capital of the trust and any income arising from it. The trustees must pay both to him if he asks for it; they no longer have a discretion.

B is not correct because under s31 Trustee Act 1925, both Timothy and Ursula have a right to the income on their respective shares of the trust fund. This income cannot be accumulated. Only the income from Victoria's share of the trust, which is not applied for her maintenance, education of benefit must be accumulated.

D is not correct because although the trustees have a discretion under s31 Trustee Act 1925 to apply income for Victoria's maintenance, education, or benefit while she is a minor, the trustees must pay income to Ursula as she is over the age of 18.

Trustees are holding on trust for "such of Christopher and Aurora Ridgway who attain the age of 25". Christopher and Aurora are twins. The trust fund comprises company shares and money in bank and building society accounts. The trust instrument contains no administrative powers relevant to this question.

Which ONE of the following would be a breach of trust by the Trustees?

The trustees buy a house in York for Christopher and Aurora to live in.

The trustees buy a house in Leeds to let to students.

The trustees buy a house in Spain to let to tourists

The trustees buy a shop in Sheffield for Christopher and Aurora to run their coffee shop business.

The answer is C. S8 Trustee Act 2000 allows trustees to buy land as a home for beneficiaries (A), as an investment (B) and for any other purpose (D). However, the land must be situated in the UK. Therefore, (unless permitted by the trust instrument) investing in land in Spain is not an authorised investment, would be unauthorised and therefore a breach by the trustees.

Is the following statement TRUE or FALSE?

In conducting the administration of the trust, the trustees must exercise such care as objectively comparable to how an ordinary, careful businessperson would manage their affairs.

T

True

F

False

The statement is TRUE. This is the principle derived from the case of Speight v Gaunt which details the standard of care which will be applied to trustees in the general administration of the trust. Although it is an objective standard, paid trustees with professional expertise will be judged by a higher standard. This standard of care sits alongside the duty of care in relation to investment activities detailed in s1 Trustee Act 2000.

An independent financial adviser has been appointed a trustee for a management consultant for life and a student in remainder. The trust fund has been valued at more than £900,000. The trustee uses all of the trust fund to purchase shares in a large international company headquartered in India whose shares trade on the Dow Jones (New York stock exchange). The company's share-​value has recently posted significant growth and the company has a reputation for paying significant dividends to its shareholders.

Which of the following statements best describes why the trustee is likely to be in breach of trust?

The trustee is only permitted to purchase shares in UK companies.

Shares are not an authorised form of investment.

The shares are not a suitable form of investment.

The shares do not represent a diverse form of investment.

The trustee failed to take proper investment advice before purchasing the shares.

Option D is correct. When purchasing investments, trustees must have regard to the standard investment criteria -​ suitability and the need for diversification. In this case, using the entire trust fund to purchase shares in one company does not respect the need for diversification. If the company gets into financial difficulties, the value of the trust fund may be materially and adversely affected.

Option A is wrong. The general power of investment contained in s 3 of the TA 2000 is not limited to the UK. Trustees can purchase investments based in any part of the world (so long as the trustee complies with the other investment duties in this chapter). This is different to purchasing land, where the power contained in s 8 of the TA 2000 is limited to land in the UK.

Option B is wrong. Shares are capable of producing both capital and income returns and are therefore a classic form of authorised investment.

Option C is wrong. Shares, in general, are a good investment for this trust. The trustee must consider the income needs of the management consultant and the capital needs of the student. Shares are capable of meeting these two needs. Focusing on the company itself, there is nothing on the facts to suggest that the company is a bad investment -​ it has a history of capital growth and dividend payments. The real issue here is one of diversification.

Option E is wrong. Whilst generally it is the case that trustees must take proper advice before purchasing investments, they do not need to do so when they reasonable conclude that it is unnecessary to do so. The trustee is an independent financial adviser, and it is reasonable to conclude that the trustee can take investment decisions without needing assistance from someone else.

A grandmother died five years ago. In her valid will, she left her entire estate to trustees on trust "for my son for life, remainder to such of my grandchildren who attain the age of 25 and if more than one equally." Her son is now aged 55 years, her grandson and granddaughter are 23 years and 18 years respectively. The trustees have been asked whether they can give some trust income to the granddaughter to pay for dancing lessons. The grandson has consented to the payment being made.

Can the trustees pay this income to the daughter?

Yes, because it is for her maintenance, education, or benefit.

Yes, because she is old enough to give a good receipt.

Yes, because the grandson has consented.

No, because she has no interest in the income.

No, because she is under 25 years of age.

Option D is correct. While the son, the life tenant, is alive, all the income must be paid to him. S31 Trustee Act 1925 does not apply to the granddaughter at the moment because she is not entitled to the trust income (so Option A, Option B, and Option C are all wrong).

Option E is wrong because her age is not the reason that the trustee cannot pay the income to the granddaughter at the moment.

The beneficiaries of a substantial trust fund have found out that 12 months ago, the trustees of the fund, both of whom are solicitors, delegated their investment duties to a stockbroker. The beneficiaries have seen the formal letter of appointment, but the trustees have confirmed that they have not met or spoken with the stockbroker since his appointment. The stockbroker has made some disastrous decisions and the trust investments are now almost worthless.

Which of the following best describes whether the trustees might be liable to the beneficiaries or not?

The trustees are liable for wrongly delegating to the stockbroker as they are professional trustees and could have done the investment work themselves.

The trustees are liable for wrongly delegating to the stockbroker as they failed to get the beneficiaries' informed consent to the appointment.

The trustees are liable as they have failed to review the appointment of the stockbroker.

Trustees are never liable for an agent's defaults.

The trustees are not liable to the beneficiaries as the stockbroker was appointed in writing.

Option C is correct. Trustees can be liable for loss caused by the agent's defaults if they have breached their own duties in relation to the appointment (s23 Trustee Act 2000). Under s.22 Trustee Act 2000, trustees have a duty to keep the arrangements with the agent under review. By failing to meet or speak with the stockbroker since the appointment, the trustees have breached this duty.

Option A is wrong because professional trustees are able to delegate even though they could have done the work themselves.

Option B is wrong because the trustees have a power to delegate under the Trustee Act 2000 which they can exercise without needing the consent of the beneficiaries.

Option D is wrong because trustees can be liable for loss caused by the agent's defaults if they have breached their own duties in relation to the appointment (s23 Trustee Act 2000).

Option E is wrong because merely appointing the agent in writing as required by s15 Trustee Act 2000 is not enough. Under s23 Trustee Act 2000, the trustees need to comply with all their duties in relation to the appointment so as to avoid liability for the agent's defaults.

A woman died in 2013 and left her estate on trust for her children if they should attain the age of 21. Her son is aged 19 and her daughter is aged 18. The trust instrument contained no powers relevant to the matter. The son is a talented singer and wants money from the trust to pay his fees and living expenses while he attends the Royal School of Music.

Which of the following best explains the trustees' position regarding the son's request?

The son cannot have any money from the trust until he attains the age of 21.

As the purpose is for his advancement or benefit, the trustees must pay the son his share of the trust fund now.

As he is over 18, the son can demand that trustees pay him his share of capital now.

The trustees have a discretion to pay trust capital up to the amount of the son's half-share provided the daughter consents.

The trustees have a discretion to pay trust capital up to the half of amount of the son's share as the stated purpose would be for his advancement or benefit.

Option E is correct. The trustees can make a capital advancement under s32 Trustee Act 1925 because the son has an interest in capital and the proposed use is for his benefit. As the trust was created before 1 October 2014, they can advance up half of the amount of the son's potential share of the trust.

Option A is wrong because, in certain circumstances, s31 and s32 allows the trustees to give the son money from the trust before they attain the requisite contingency age.

Option B is wrong because, although the stated purpose is for the son's advancement or benefit, his interest in the trust fund remains contingent as is he under 21. The trustees have a power in s32 Trustee 1925 to advance capital prior to this age, but this is at their discretion. Additionally, as the trust was created before 1 October 2014, they could only advance up half of the amount of the son's potential share of the trust.

Option C is wrong because s32 gives trustees a complete discretion; the son cannot 'demand' an advancement regardless of his age.

Option D is wrong; trustees require consent only from a beneficiary with a prior interest (i.e., a prior life tenant) and the daughter does not have a prior interest.

There are two trustees of a substantial trust fund. There are three beneficiaries of the trust fund aged 21 years, 18 years, and 12 years respectively. The trust instrument contains no provisions regarding removal and appointment of trustees.The beneficiaries have found out that one of the trustees has been made bankrupt.

Which of the following best describes the position in light of the trustee's bankruptcy?

The bankrupt trustee will be automatically removed as a trustee to avoid creditors claiming the trust property.

The beneficiaries can remove the bankrupt trustee as a trustee on the ground that they are unfit to act.

The bankrupt trustee can retire so that the other trustee can continue as the sole trustee.

The beneficiaries cannot require the bankrupt trustee to retire.

The other trustee can remove the bankrupt trustee and continue as the sole trustee.

Option D is correct. As the trust instrument contains no provisions regarding the removal and appointment of trustees, the beneficiaries would have to rely on s19 Trust of Land and Appointment of Trustees Act 1996 which provide the beneficiaries with a power to require a trustee to retire. However, s19 cannot be used here as all the beneficiaries are not adults.

Option A is wrong because a bankrupt trustee can continue to act until he is removed. Creditors would not be able to claim the trust property.

Option B is wrong because replacements under s36 Trustee Act 1925 on the ground of being unfit to act can only be made by the continuing trustees, not the beneficiaries.

Option C is wrong because, while s39 Trustee Act 1925 does allow a trustee to retire without replacement, at least two trustees must remain after the retirement.

Option E is wrong because, while s36(1) Trustee Act 1925 does allow the other trustee to remove the bankrupt on the grounds of being unfit, a replacement trustee must be appointed.

The trustees are holding property on trust valued at £500,000 for the settlor's grandchildren who reach the age of 25 years. There are currently two grandchildren, both under the age of 25 years. There are no relevant express provisions in the trust deed.

The grandchildren are unhappy with the way that the trustees have run the trust to date. In particular, two years ago, each grandchild requested that the trustees advance the sum of £10,000 to them for different purposes. The trustees discussed these requests at a meeting ('the Advancement Meeting') and agreed to advance £10,000 to one grandchild, but not the other. The grandchildren are starting to make various demands of the trustees.

Which of the following best describes what documentation (if any) the trustees must provide to the beneficiaries?

The trustees must, upon request, supply the beneficiaries with copies of the trust deed, accounts, schedule of investments and the minutes of the Advancement Meeting.

The trustees must, upon request, supply the beneficiaries with copies of the trust deed, accounts, and schedule of investments.

The only document to which the beneficiaries are entitled is the minutes of the Advancement Meeting.

The trustees need not supply any documents or information to the beneficiaries.

The trustees need not supply the minutes of the Advancement Meeting, but in the interests of fairness must give reasons as to why they advanced capital to one beneficiary but not the other.

Option B is correct. The beneficiaries are entitled to see the trust deed, accounts, and information about investments as of right. The trustees cannot refuse to hand over such documents.

Option E is wrong. The trustees are under no duty to give reasons for their decisions (and this is unlikely to be a case where the beneficiaries have a legitimate expectation that such reasons be given).

Options A and C are wrong for similar reasons. The beneficiaries are not entitled to documents that record why trustees exercised their powers in a particular way, such as the minutes of the Advancement Meeting (although the beneficiaries could go to court and attempt to secure the disclosure of those minutes under the court's inherent supervisory jurisdiction).

Option D is wrong. The beneficiaries are entitled as of right to those documents listed in option B.

A man died six years ago leaving his estate on trust for her children, if they should attain the age of 21. His daughter is aged 19 and his son is aged 18. The trust instrument contained no powers relevant to the matter.

Which of the following best describes the position regarding the trust income?

All the income earned must be accumulated as the children are under 21 years of age.

The trustees have a discretion to pay trust income for the maintenance, education, or benefit of the children.

The trustees must pay the trust income to the children in equal shares.

The children do not have an interest in trust income.

Any income not paid for the maintenance, education, or benefit of the children must be accumulated.

Option C is correct. Under s31 Trustee Act 1925, trustees can apply trust income for the maintenance, education, or benefit of infant beneficiaries (a power). However, the children are both over the age of 18. Once the beneficiaries attain the age of 18, the trustees are under a duty to pay them their respective shares of trust income; the discretion ceases (so options A and B are wrong).

Option D is wrong because the children have interests in trust income as there is no life tenant with a prior interest in the income.

Option E is wrong because all the income must be paid out and none will be accumulated.

There are two trustees of a trust. There are three beneficiaries aged 25 years, 21 years, and 18 years respectively. One of the trustees has been working outside the UK for the last 15 months and has not taken part in the management of the trust. All beneficiaries want to remove her. There are no relevant provisions in the trust instrument.

Which of the following best describes the beneficiaries' position?

The beneficiaries can remove the trustee on the ground that she has been outside the UK for more than 12 months.

The beneficiaries can serve a request on the absent trustee to retire.

The beneficiaries cannot apply to the court to remove the trustee because such applications are only available to the trustees.

The beneficiaries do not need to take any action as the trustee automatically ceased to be a trustee once she had been outside the UK for more than 12 months.

The beneficiaries can only remove the absent trustee with the consent of the other trustee.

Option B is correct. As the beneficiaries are all alive, ascertained, over 18 and in agreement, under s19 Trusts of Land and Appointment of Trustees Act 1996, the beneficiaries have a power to remove (and replace) a trustee.

Option A is wrong because s36 Trustee Act 1925 cannot be used by beneficiaries; the replacement has to be achieved by the trustees.

Option C is wrong because beneficiaries can apply to court to replace a trustee if it is difficult, inexpedient, or impractical to do so without the court's assistance.

Option D is wrong because, although absence for this length of time is a ground for removal under s36, the other trustees must follow the s36 procedure for removal; it is not automatic.

Option E is wrong because the beneficiaries are able to exercise their power under s19 TOLATA 1996 without the consent of the other trustees.

A family trust was established 10 years ago by will. The deceased left his residuary estate to trustees to hold on trust for his widow for life, remainder to his daughter. The will contained no provisions varying the trustees' powers. Last month, the widow learnt to her surprise that the trustees had transferred £20,000 from the trust fund to the daughter, to help pay off her substantial overdraft. The daughter is aged 22 years.

Which of the following best describes the position regarding the transfer?

As the will created a discretionary trust, the trustees were entitled to make the transfer to the daughter as she was a beneficiary named in the will.

As the daughter has only a contingent interest in the capital of the trust fund, the trustees did not have the power to pay the £20,000 to her.

As the daughter is over 18, the trustees were required to pay the money to her.

As the transfer to the daughter was an exercise of trustee discretion, the widow cannot challenge their decision.

The trustees should have obtained the widow's written consent before they transferred the £20,000 to the daughter.

Option E is correct. S32 Trustee Act will apply in the absence of any variation in the will. It provides the trustees with a power to advance capital to a beneficiary with an interest in the trust capital, which the daughter has. However, s32 requires that no payment be made without the written consent of any person with a prior interest. As life tenant, the widow has a prior interest; her consent was needed to allow the transfer to be made.

Option A is wrong as the trust is not discretionary. The trustees were required to apply all the income generated by the trust to the widow, preserving the capital for the daughter.

Option B is wrong for two reasons - the daughter has a vested interest in the capital of the trust; there is no condition which she has to satisfy to become entitled. Her vested interest is merely postponed until the widow dies. In any event, even if her interest was contingent, s32 Trustee Act 1925 gives trustees power to advance capital to any beneficiary with an interest in capital, regardless of whether the interest is vested or contingent.

Option C is wrong because a one-off payment would be regarded as a capital advancement. Although the daughter has an interest in the capital, she does not have a right to this capital until the widow dies. Under s32 Trustee Act, the trustees have a power to advance capital, but they do not have to.

Option D is wrong because the trustees have exercised their discretion improperly. The trustees have breached their duty to the widow under s32 in failing to obtain her consent to the transfer to the daughter. The widow will have been prejudiced by the loss of capital from the trust fund (a reduction in her income) and could take action.

A woman is about to undergo surgery and has been advised that she will need to take at least six months off work to recover. The woman is a trustee and is worried about being able to perform her functions as trustee while she is recovering from the surgery. There is nothing in the trust deed that says anything about appointing someone else to step into her role.

Which of the following best describes whether she can appoint someone else to step into her role while she is unable to perform her functions?

She can appoint an attorney by telephone and should take care about who she appoints.

She can appoint an attorney by deed and should take care about who she appoints.

She can appoint an attorney by deed and does not need to worry about who she appoints.

She cannot appoint an attorney as she was personally chosen by the settlor to be a trustee.

She cannot appoint an attorney as there is nothing in the trust deed that allows this.

Option B is correct. The trustee can (and should) appoint an attorney to carry on her role while she is indisposed. That appointment must be made by deed. As the trustee will be automatically (vicariously) liable for any defaults of the attorney, she should take great care in selecting someone she thinks will do a good job.

Option A is wrong. The appointment of an attorney must be made by deed (TA 1925, s 25) and cannot take place over the telephone.

Option C is wrong. The trustee will be automatically (vicariously) liable for any defaults of the attorney she appoints, so she must take care when making her selection.

Option D is wrong. The fact that she is an original trustee, chosen personally by the settlor, does not prevent her from appointing an attorney.

Option E is wrong. A trustee can use the power granted under s 25 of the TA 1925 to appoint an attorney regardless of whether or not the trust deed contains any express provision on the matter.

Which ONE of the following is NOT an aspect of the law relating to a trustee's fiduciary duties?

Fiduciaries must not make an unauthorised profit from their position.

Strict liability.

Fiduciaries must not allow their personal interest to conflict with their duties.

The remedy where a trustee has made a personal profit in breach of fiduciary duty is always based on the loss which the trust has suffered.

The answer is D. The remedy for breach of fiduciary duty is that the trustee must give up their profit. The beneficiaries can recover the profit whether or not the trust has suffered loss (see for example, Boardman v Phipps).

All the others are fundamental aspects of a trustee's fiduciary duties to the beneficiaries.

Fred and James are trustees for Alice and Ben. There are no clauses in the trust instrument relevant to this question. Fred wishes to purchase some land from the trust.

Which ONE of the following statements is CORRECT?

Trustees can never buy property from the trust due to the conflict of interest.

There is nothing to stop Fred buying the land from the trust if he buys it at auction because he will pay a fair price.

An unauthorised sale to Fred would be voidable by the beneficiaries within a reasonable time.

A sale of the land to Fred with James' agreement could not be challenged.

The answer is C. Without authorisation, the sale of trust property to one of the trustees gives rise to a conflict of interest (the trustee acting as both seller and buyer in the transaction). Under the 'self-dealing rule', the beneficiaries can set the transaction aside if they wish to do so, provided they do so within a reasonable time.

A is not correct because trustees can buy land from the trust if there is a clause permitting them to do so in the trust instrument, the court consents, or all the beneficiaries are sui juris and agree with knowledge of all the material facts.

B is not correct because, on the face of it, any sale to a trustee, regardless of the circumstances of the sale, is a breach of their fiduciary duty because there is a conflict of interest, and the principle of strict liability arises. It will not matter that the trustee pays a fair price for the property, or if the sale takes place at an auction.

D is not correct because the agreement of the other trustee(s) does not validate the sale.