Examiners’ report 2013

Examiners’ report 2013

LA3002 Law of trusts – Zone A

Introduction
It is important to take care at the beginning of the examination to read the questions
carefully, determine what each question is about, and decide which four questions
to answer. There is a limited range of topics that might be examined and no two
questions will be about the same topic (although some slight overlap may occur).
The eight questions are set to allow you to demonstrate your knowledge and
understanding of the law and ability to apply it to specific issues. There are no trick
questions. If you ask yourself, ‘why are the Examiners asking me this question’, you
can identify what the question is really about and whether it will provide you with a
good opportunity to perform at your best.
Divide the remaining time evenly among the four questions, and for each question,
plan your answer before you begin writing. This will help ensure that you do not
miss any important points and that your answer will be coherent and well presented.
While this may leave you with only 30 minutes of actual writing time per question, a
shorter, thoughtful and relevant answer is much better than a longer, rambling and
sometimes irrelevant one.

Specific comments on questions

Question 1
Richard and Sheryl are the trustees of a large family trust that was created by
Edwin for the benefit of his children and grandchildren, including Olive,
Dwayne, and Cindy. The trustees have the powers to make any investments
permitted by law and to distribute the income and capital as they see fit
among the beneficiaries for a period of 30 years, after which time they must
divide the remaining assets equally among the surviving beneficiaries. The
trustees also have the power to pay income to the former spouse of a
deceased beneficiary.
The trustees used £250,000 from the trust to purchase a flat in France for
Olive to occupy for four years while she attended university there. They sold
it recently for £200,000.
Richard is a big supporter of organic foods. He convinced Sheryl that they
should invest £150,000 of trust funds in shares in several organic food
companies. Those shares are now valued at £100,000.
Dwayne died last year. He was never married, but was survived by his long-
time partner, Josh. The trustees paid £50,000 to Josh.

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Cindy seeks your advice concerning the above transactions. What claims, if
any, do the beneficiaries have against Richard and Sheryl?
General remarks
This question concerns the powers of trustees to invest and distribute trust assets.
The trustees have misused or exceeded their powers in three instances and will be
personally liable to restore the trust to the financial position that it should have been
in had they acted properly.
Law cases, reports and other references the Examiners would expect you to
use
Trustee Act 2000.
Cowan v Scargill [1985] Ch 270.
Harries v Church Commissioners for England [1993] 2 All ER 300.
Common errors
It is hard to discuss the trustees’ powers of investment without referring to the
Trustee Act 2000. The issue of ethical investing calls for a reference to Cowan v
Scargill [1985] Ch 270, Harries v Church Commissioners for England [1993] 2 All
ER 300 or both.
Some candidates missed the essential point of the question, and talked instead
about the three certainties, none of which is relevant. The question clearly states
that ‘Richard and Sheryl are the trustees’ and sets out the terms of the trust that are
relevant to the exercise of their powers of investment and distribution.
The question ends by asking, ‘What claims, if any, do the beneficiaries have against
Richard and Sheryl?’ This calls for a discussion of the trustees’ duty to account and
their liability flowing from falsifying or surcharging the account. Some candidates did
not appreciate the difference between falsifying and surcharging or mixed them up.
Some also discussed Josh’s liability to repay the money received. While that would
clearly be relevant in the real world, that was not the question asked and so it would
not be a good use of time to deal with it in your answer.
A good answer to this question would…
deal competently with the trustees’ powers to invest and distribute trust assets, their
misuse of those powers and their liability to account for it to the beneficiaries.
Flat in France Since there are no restrictions in the trust instrument on the trustees’
power of investment, they have ‘the general power of investment’ provided by the
Trustee Act 2000, s.3, which permits them to invest in anything other than land.
Section 8 permits them to acquire land in the UK for occupation by a beneficiary,
but this would not permit the purchase of land in France. Therefore, the investment
was unauthorised and in breach of trust. The land has now been sold, but for a loss
of £50,000. The trust account can be surcharged for that sum plus the income that
would have been earned on £250,000 over four years if it had been invested
properly. The trustees are personally liable for that amount.
As an aside, there is an interesting point about whether the purchase of a residence
for a beneficiary to occupy is an exercise of the trustees’ power of investment or
merely a distribution of assets to that beneficiary, like paying her rent: see Re
Power [1947] Ch 572. In any event, the trustees do not have the power to purchase
land in France either under the Trusts of Land and Appointment of Trustees Act
1996, s.6(3), or the Trustee Act 2000, s.8.
Organic foods. Although the trustees had the power to invest in organic food
companies, it appears that they exercised that power in breach of trust. They
breached the duty of care owed when exercising their power of investment, and

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failed to take proper advice before exercising that power: Trustee Act 2000, ss.1, 2,
and 5. It also appears that they breached their fiduciary duty by preferring Richard’s
personal interests over the best interests of the trust beneficiaries. As set out in
Cowan v Scargill [1985] Ch 270 and Harries v Church Commissioners for England
[1993] 2 All ER 300, the investment power should not be used to promote ethical
considerations, but only to generate the income and capital needed to carry out the
trust. The trustees should take proper advice, which will probably lead to selling
some or all of the organic food company shares, and the trust account can be
surcharged for the amount that should have been earned if they had invested
properly.
Payment to Josh. The trustees have a power of appointment in favour of former
spouses of deceased beneficiaries. Although Josh was equivalent to a former
spouse, he was not within the class of objects for which that power could validly be
exercised. Although the trustees probably acted with the best intentions in the spirit
of the purpose for which that power was created, they did not have authority to
make the payment to Josh. The trust account can be falsified and the trustees
made personally liable to restore that amount to the trust. Some candidates
discussed whether the term ‘spouse’ in the trust instrument could be construed to
include a long term partner, and that was fine.
Question 2
Explain the nature and validity of the following clauses in Arnold’s will
concerning the distribution of his residuary estate:
(a) my trustees may distribute up to £100,000 as they see fit among
alumni of the University of London who live in countries that are
struggling with disease, poverty, or armed conflict;
(b) my trustees shall distribute one-third of my residuary estate as they
see fit among my friends and their immediate families;
(c) the remainder of my estate, if any, shall be distributed equally among
all current and former members of the English Wine Appreciation
Society.
Shortly before Arnold died, the records of the English Wine Appreciation
Society were destroyed in a fire. The secretary of the society said that it was
impossible to compile an accurate list of current and former members.
General remarks
This question concerns certainty of objects for a power of appointment, a
discretionary trust and a fixed trust. A good answer should identify the nature of
each power or trust and discuss whether it is valid, with reference to the relevant
authorities, as discussed below. There are no issues concerning certainty of
intention or certainty of subject matter, and it would waste time to say much more
than that with respect to either one.
Law cases, reports and other references the Examiners would expect you to
use
McPhail v Doulton [1970] UKHL 1, [1971] AC 424.
Re Baden’s Deed Trusts (No 2) [1972] EWCA Civ 10, [1973] Ch 9.
Re Barlow’s Will Trusts [1979] 1 All ER 296, [1979] 1 WLR 278.
Common errors
Many candidates provided a stock answer on all three certainties even though there
are no issues concerning certainty of intention or subject matter. This wasted time

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and also cast doubt on the candidate’s ability to identify and discuss relevant legal
issues. Many candidates failed to identify clause (a) properly as a power of
appointment. The phrase ‘my trustees may distribute’ clearly indicates a power of
appointment, but some candidates suggested that the word ‘may’ indicated a lack of
certainty of intention to create a trust. Some candidates also failed to identify clause
(b) as a discretionary trust and clause (c) as a fixed trust, or failed to apply the
appropriate test for certainty to each type of trust. Many candidates said that one or
more of the clauses were ‘administratively unworkable’, but that was not an issue.
A good answer to this question would…
identify the nature of each power or trust and discuss whether it is valid, with
reference to the relevant authorities. It would directly address the question, which
begins by asking candidates to ‘explain the nature and validity’ of each clause.
(a) This is a fiduciary power of appointment since the trustees do not have to
exercise it, but must merely consider from time to time whether to exercise it. The
difficulty is identifying the class of potential objects of the power. It would be easy to
determine who are alumni of the University of London and where they reside, but
there may be uncertainty over whether they ‘live in countries that are struggling with
disease, poverty, or armed conflict’. Many countries are clearly in that situation and
many others are clearly not, but there must also be many countries where this is
uncertain. According to McPhail v Doulton [1970] UKHL 1, [1971] AC 424, the test
for certainty of objects is the same for powers and discretionary trusts, and there is
no need to compile a complete list of objects, but it is necessary to be able to say
with certainty whether any given person is inside or outside the class of objects.
Criticism of this test and its application to powers of appointment would be
appropriate.
(b) This is a discretionary trust requiring conceptual (but not list) certainty discussed
in relation to clause (a). Candidates should discuss the problems raised by the
meaning of ‘friends and their immediate families’, with reference to the relevant
case law, such as McPhail v Doulton, Re Gibbard [1966] 1 All ER 273, [1967] 1
WLR 42, Re Barlow’s Will Trusts [1979] 1 All ER 296, [1979] 1 WLR 278 and Brown
v Gould [1972] Ch 53.
(c) This is a fixed trust. It will be necessary to compile a complete list of objects
before the remainder can be divided equally among them, since it is not possible to
determine the size of each beneficiary’s share without that list. There is no problem
of conceptual uncertainty: the class is clearly defined. The problem is purely one of
missing evidence. It was said by Sachs J in Re Baden’s Deed Trusts (No 2) [1972]
EWCA Civ 10, [1973] Ch 9 at 20, that the court is never defeated by evidential
uncertainty, but that was in the context of a discretionary trust. Perhaps the problem
can be solved by compiling the best list possible, advertising for beneficiaries and
distributing with approval of the court.
Question 3
Donna owned three houses (in fee simple) in her local village. She wanted to
give one house (called ‘Carnation Cottage’) to her daughter, Amy, and
another house (called ‘Violet Villa’) to her other daughter, Rose. Donna
executed the forms to be used to transfer those fee simple estates to her
daughters, and on the day she left for a long ocean cruise, delivered both
transfer forms to Amy and asked her to take care of the registration to
complete the transfers. Amy agreed, but was busy at work and forgot to
submit the forms for registration.
Donna died during her ocean cruise. Her son, Rory, is the sole beneficiary of
her entire estate and her executrix, Martha, is now the registered owner of all

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three houses. Amy still has the transfer forms in her possession. The form
to transfer Carnation Cottage to Amy was improperly executed and therefore
could not have been registered. The form to transfer Violet Villa to Rose was
valid and registrable up until Donna died.
What rights, if any, does Amy have to Carnation Cottage? What rights, if any,
does Rose have to Violet Villa? Would it make any difference to your answers
if Amy had been appointed as Donna’s executrix, instead of Martha?
General remarks
This question concerns the problem of incomplete gifts. A good answer would
discuss the Re Rose principle, as applied in Mascall v Mascall and Pennington v
Waine. It would also consider whether the principle in Strong v Bird can apply to the
alternative facts. Candidates waste time if they survey all the different ways in which
equity intervenes on behalf of donees.
Law cases, reports and other references the Examiners would expect you to
use
Strong v Bird (1874) LR 18 Eq 315.
Re Stewart [1908] 2 Ch 251.
Re Rose [1952] EWCA Civ 4, [1952] Ch 499.
Mascall v Mascall [1984] EWCA Civ 10.
Pennington v Waine [2002] EWCA Civ 227.
Common errors
Some candidates confused the constitution of trust with the completion of gifts.
Donna was trying to make gifts to her daughters and was not intending to create a
trust for them. The trust which might arise in this situation is constructive, not
express. Many candidates discussed the variety of different exceptions to the
maxim that equity will not assist a volunteer (donee), even though most are not
relevant. In a few cases, candidates discussed the rule in Strong v Bird as one of
those exceptions, but then failed to realise that it was relevant to the alternative
facts posed in the question. Some candidates treated this as a case of donatio
mortis causa, because Donna died shortly after attempting the gifts, but there was
nothing to indicate that these were conditional gifts made in contemplation of death.
A good answer to this question would…
discuss the Re Rose principle, as applied in Mascall v Mascall [1984] EWCA Civ 10
and Pennington v Waine [2002] EWCA Civ 227. It would also consider whether the
principle in Strong v Bird (1874) LR 18 Eq 315 can apply to the alternative facts.
The defect in the form to transfer Carnation Cottage to Amy meant that she could
not complete the transfer without Donna’s help, so an important issue is whether it
could be unconscionable for Donna to resile from her gift. The form to transfer
Violet Villa to Rose was registrable, but in Amy’s possession, so the essential issue
is whether Amy held it as agent for Donna or for Rose. Both these issues were
discussed in Pennington v Waine. If Amy had been Donna’s executrix, the essential
issue would be whether Donna’s intention to make a gift to Amy prevails over Amy’s
duty to convey it to Rory according to Donna’s will: Re Stewart [1908] 2 Ch 251.
Donna wanted to make gifts of fee simple estates to her daughters, Amy and Rose.
Legal title to an estate in land is transferred by registration. Since the transfer forms
executed by Donna were not registered, she remained the legal owner at the time
of her death, and then title was transferred to her executrix, Martha, by registration.
The intended inter vivos gifts were never complete and the land will go to Rory
unless equity will intervene.

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Clearly, Donna intended to make a gift and not declare a trust, and a failed gift will
not be treated as a declaration of trust in order to save it: Milroy v Lord [1862]
EWHC Ch J78. However, a constructive trust can arise if the donor has done
everything they need to do to complete the gift and the intended donee has the
power to complete it. This is not an exception to the rule that equity will normally not
compel a donor to complete a gift, but really a situation to which the rule does not
apply, since the donor has completed all the steps required of her and is not being
compelled to do anything further.
Carnation Cottage. Amy has possession of the transfer form, but it is defective and
cannot be registered, therefore she did not have the power to complete the gift
without Donna’s help. It would have been necessary to compel Donna to execute a
new transfer form and there does not seem to have been any justification for doing
so. In Pennington v Waine, Arden LJ talks in terms of whether it would be
unconscionable for the donor to resile from the gift, but there seems to be no
detrimental reliance or any other reason why that might be so. A few candidates
argued that it would be unconscionable not to give effect to Donna’s intended estate
plan, which was one house for each of her three children. This was an interesting
idea, especially since there is very little guidance on what unconscionability means
in this context.
Violet Villa. The transfer form was valid and registrable, but Rose never received it.
The essential question is whether Amy held the form as agent for Donna or agent
for Rose. If Amy was Donna’s agent, then Rose never had the power to complete
the gift without the donor’s help. If Amy was Rose’s agent, the Re Rose principle
should apply and Donna would have been holding title on constructive trust for
Rose. In Pennington v Waine, Arden LJ said that Mr Pennington had become the
donee’s agent after he told the donee about the gift and that the donee need not
take any further action. It does not appear that Donna or Amy ever communicated
with Rose in a similar fashion. It seems more likely that Amy was Donna’s agent
until her death.
Amy as executrix. If Amy had been appointed as Donna’s executrix, she would
have obtained legal title to both cottages, with a duty to distribute them according to
law. This would not help Rose, since Amy would no longer be Donna’s agent and
would have no authority to register the transfer to Rose. If the Re Rose principle
already applied to the intended gift to Rose, then it would not matter who was
appointed as Amy’s executrix. It should help Amy, since the gift should be regarded
as complete according to the rule in Strong v Bird. In that case, a creditor appointed
her debtor as her executor with the intention of forgiving the debt, and this operated
to cancel the debt. This has been extended to other incomplete gifts so long as the
donor had a continuing intention to give. Donna’s intention to make a gift to her
executrix, Amy, would prevail over Amy’s duty to convey it to Rory according to
Donna’s will: Re Stewart [1908] 2 Ch 251.
Question 4
‘When section 199 of the Equality Act 2010 comes into force and the
presumption of advancement is thereby abolished, this will have almost no
effect because the presumptions of advancement and resulting trust no
longer carry much weight and rarely determine the outcome of any cases.’
Discuss.
General remarks
This question concerns the presumptions of advancement and resulting trust. A
good answer would consider the nature and function of the presumptions in modern
society, including their effect on transactions for illegal purposes. It would be a

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waste of the candidate’s time merely to describe the situations in which resulting
trusts normally arise or the competing theories about resulting trusts put forward by
Birks, Chambers and Swadling.
Law cases, reports and other references the Examiners would expect you to
use
Tinsley v Milligan [1993] UKHL 3, [1994] 1 AC 340.
Common errors
Many candidates merely provided a stock answer about resulting trusts, the
situations in which they arise, and the competing theories about resulting trusts put
forward by Birks, Chambers and Swadling. This failed to address the question,
which is about the presumptions. However, it would be relevant to discuss
academic views on the nature of the presumptions, such as Swadling, W.
‘Explaining resulting trusts’, Law Quarterly Review 124 2008, p.72, Chambers, R. ‘Is
there a presumption of resulting trust?’ in Mitchell, C. (ed.) Constructive and
resulting trusts. (Oxford: Hart Publishing, 2010), p.267 or Glister, J ‘Is there a
presumption of advancement?’ Sydney Law Review 33, 2011, p.39.
A good answer to this question would…
consider the nature and function of the presumptions in modern society, including
their effect on transactions for illegal purposes.
For most cases, it does not matter which presumption applies since the decision is
almost always based on proof of the relevant intentions without reliance on a
presumption (e.g. Lohia v Lohia [2001] EWCA Civ 1691). The one big exception is
the case where evidence of intention is inadmissible because it reveals an illegal
purpose: Tinsley v Milligan [1993] UKHL 3, [1994] 1 AC 340. The candidate might
also consider the effect of s.60(3) of the Law of Property Act 1925 to transfers of
land, and the non-application of the presumptions to the family home in Stack v
Dowden [2007] UKHL 17, [2007] 2 AC 432 and Jones v Kernott [2011] UKSC 53,
[2011] 3 WLR 1121.
Question 5
‘Sinclair Investments is a highly controversial decision. It has divided legal
scholars and the common law world…. I think it would be fair to say, as
reflected in all the leading textbooks, that prior to the decision in that case it
was generally accepted by trust and equity practitioners and judges
throughout the common law world that Reid would be followed in preference
to Lister.’ (Etherton C, in FHR European Ventures LLP v Mankarious (2013)).
Discuss.
General remarks
This question concerns the proper responses to assets acquired in breach of
fiduciary duty and whether this should give rise to a constructive trust or an account
of profits.
Law cases, reports and other references the Examiners would expect you to
use
Lister & Co v Stubbs (1890) 45 Ch D 1.
A-G Hong Kong v Reid [1993] UKPC 2, [1994] 1 AC 324, [1994] 1 NZLR 1.
Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347,
[2012] Ch 453.

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Common errors
Some candidates attempted to answer the question without knowing what it was
about, but otherwise there are no common errors to report.
A good answer to this question would…
discuss the current controversy, with the Court of Appeal in Sinclair choosing to
follow its own decisions in Metropolitan Bank v Heiron (1880) 5 Ex D 319 and Lister
& Co v Stubbs (1890) 45 Ch D 1, contrary to the Privy Council’s advice in A-G Hong
Kong v Reid [1993] UKPC 2, [1994] 1 AC 324, [1994] 1 NZLR 1. It should consider
the arguments for and against imposing a constructive trust of a bribe, including the
effect of the trust on other creditors (who may have provided value to the fiduciary’s
estate or suffered a loss caused by her or his breach of duty) and whether
meaningful distinctions can be drawn by breaches of fiduciary duty and breaches of
other duties.
An excellent answer might consider the distinctions drawn in Sinclair, between
misuse of the principal’s property, misuse of the principal’s opportunities, and other
breaches of fiduciary duty, and whether these categories provide a satisfactory
basis for choosing between a constructive trust and an account of profits. It might
also consider the extra-judicial views of Lord Millett in ‘Bribes and secret
commissions again’ Cambridge Law Journal 71 2012, p.583.
Question 6
‘A testator cannot reserve to himself a power of making future unwitnessed
dispositions by merely naming a trustee and leaving the purposes of the trust
to be supplied afterwards, nor can a legatee give testamentary validity to an
unexecuted codicil by accepting an indefinite trust, never communicated to
him in the testator's lifetime’. (Lord Wright MR, in Re Keen (1937)).
Discuss.
General remarks
This question concerns secret trusts, and in particular, the timing of communication
of trust objects to a half secret trustee.
Law cases, reports and other references the Examiners would expect you to
use
Wills Act 1837, s.9.
Re Boyes (1884) 26 Ch D 531.
Re Keen [1937] Ch 236 (CA).
Ledgerwood v Perpetual Trustee Co Ltd (1997) 41 NSWLR 532.
Common errors
Many candidates merely reproduced a stock answer about secret trusts and the
theories behind them, without directly addressing the issues raised in the quotation.
A good answer to this question would…
discuss the arguments over the traditional requirement that communication must
take place before the execution of the will, possibly with reference to developments
in other jurisdictions. It would set out the formalities required by the Wills Act 1837
for making a valid will or codicil, why secret trusts are exempt from this requirement,
and whether the different treatment of fully and half secret trusts is justified.
A discussion of the role played by communication and acceptance would be
relevant, and so would the type of trust being enforced.

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Question 7
Consider the validity of the following bequests made by Alison, who died
recently:
(a) £100,000 to provide tennis lessons for the poor;
(b) £100,000 to promote graffiti art in greater London;
(c) £100,000 to promote non-traditional forms of marriage within the
Church of England;
(d) £100,000 to provide scholarships for the students from the Village of
Valley View to attend the University of London.
The Village of Valley View has a total population of 500, with about 10
villagers attending a college or university somewhere in the UK each year.
General remarks
This question concerns charitable purposes.
Law cases, reports and other references the Examiners would expect you to
use
Charities Act 2011.
Oppenheim v Tobacco Securities [1950] UKHL 2, [1951] AC 297.
McGovern v A-G [1982] Ch 321.
Common errors
Some candidates referred to the old Charities Act 2006 rather than the current 2011
Act, but this was not treated as a major error. A more serious problem was the
failure of some candidates to refer to the Charities Act at all and attempt to answer
the question by reference only to the common law. Some candidates discussed
certainty of objects and ‘administrative workability’ even though charitable purpose
trusts do not have beneficiaries. Some candidates suggested that trusts which were
not charitable could be turned into valid charitable purpose trusts by means of the
cy-près doctrine. The most common errors were failures to identify the relevant
heads of charity or the problems with benefits to the public.
A good answer to this question would…
identify the particular charitable purpose involved in each bequest and focus on the
potential problems with each bequest, with reference to the relevant provisions of
the Charities Act 2011 and relevant case law.
(a) This calls for a discussion of ‘relief of poverty’, ‘advancement of education’ and
‘advancement of amateur sport’ under s.3(1)(a), (b) and (g), considering whether
this would actually relieve poverty. To provide a benefit to the public, charities
cannot exclude the poor (Independent Schools Council v Charity Commission
[2011] UKUT 421), but that would not prevent them from limiting its benefits to the
poor. A good answer might explain how the promotion of sport was not charitable at
common law unless it was connected to schools or universities and thus
educational, but this was changed by the Charities Act 2006 (now 2011).
(b) This appears to be either ‘advancement of education’ or ‘advancement of the
arts [or] culture’ under s.3(1)(b) or (f), since education has long included artistic and
aesthetic education. A difficulty is whether the promotion of graffiti art would benefit
the public or be regarded as a harmful activity.
(c) The promotion of ‘non-traditional forms of marriage within the Church’ might be
regarded as ‘advancement of religion’ under s.3(1)(c), but this appears to be
promoting a political cause, which would not satisfy the public benefit requirement:

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McGovern v A-G [1982] Ch 321. This might fall under s.3(1)(h) as ‘the advancement
of human rights … or the promotion of religious … harmony or equality and
diversity’. It might be noted that the preamble of the Charitable Uses Act 1601
included ‘marriages of poor maids’ and that s.3(1)(m) validates ‘charitable purposes
… under the old law’.
(d) This is clearly for the ‘advancement of education’, s.3(1)(b). The only issue is
whether the small number of students who can benefit constitutes the public. It is
important that there is no personal connection (e.g. employment or family) between
Alison and the students: Oppenheim v Tobacco Securities [1950] UKHL 2, [1951]
AC 297.
Question 8
‘The advice of the Privy Council in Royal Brunei Airlines Sdn Bhd v Tan (1995)
created more problems than it solved. The added requirement of dishonesty
was completely unnecessary. Personal liability for knowing assistance
requires actual knowledge that the assets were transferred in breach of trust.
Nothing more is required and nothing less will do.’
Discuss.
General remarks
This question concerns personal liability for dishonestly assisting a breach of trust
or fiduciary duty.
Law cases, reports and other references the Examiners would expect you to
use
Royal Brunei Airlines Sdn Bhd v Tan [1995] UKPC 4, [1995] 2 AC 378.
Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164.
Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37,
[2006] 1 All ER 333.
Common errors
Many candidates reproduced stock answers about knowing receipt and dishonest
assistance, spending equal time on both. It would be relevant to compare and
contrast liability for knowing receipt, but the question clearly calls for a focus on
dishonest assistance. Some candidates discussed breach of trust and the liability of
trustees at length, even though this was only marginally relevant.
A good answer to this question would…
focus on dishonest assistance, comparing it to liability for knowing receipt, but
without wasting too much time discussing the latter. It would discuss the basis of
liability for dishonest assistance and compare Royal Brunei Airlines v Tan to
Twinsectra Ltd v Yardley and Barlow Clowes International Ltd v Eurotrust
International Ltd, with reference to the subjective test for dishonesty applied in
Twinsectra, but not in Eurotrust. A discussion of levels of knowledge and suspicion,
contrasting them with notice, would be appropriate, along with the difference (if any)
between dishonesty and actual knowledge of breach of trust.

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