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Exam 2018 Questions and Answers
Exam 2018 Questions and Answers
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 to decide which three
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). If you think that two different questions are about the same issues then you
have misunderstood one or both of the questions.
The six questions are set to allow you to demonstrate your knowledge and
understanding of the law and your ability to apply it to specific issues. There are no
trick questions. If you ask yourself why the examiners are asking a question, you
can identify what it is really about and whether it will provide you with a good
opportunity to perform at your best.
Always pay careful attention to the question asked. For example, on Question 4,
some candidates ignored the mention of ‘beneficiaries’ and wrote a general essay
on the characterisation of charity under the 2011 Act. It was clear that the question
was intended to raise a discussion about the enforcer principle, and was not about
charities per se.
It is equally important to pay careful attention to the question asked, whether it is a
problem question or an essay question. If, for example, you are asked to discuss a
quotation, it is not sufficient to write a general essay on that area of law. You need
to consider carefully what specific issues are raised by the quotation.
After you decide which three questions to answer, divide the remaining time evenly
among them and, for each question, plan your answer before you begin writing.
This will help to ensure that you do not miss 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.
As in previous years, the most common reasons why candidates performed poorly
on the examination were because they: (a) failed to manage their time properly and
thus did not provide three complete answers; or (b) failed to address questions
properly and wrote one or more answers that were mostly irrelevant. Some
candidates performed poorly on problem questions because they wasted time
describing the law generally before answering the question. Even if the description
of the law is accurate and relevant, it does not demonstrate to the examiners that
the candidate understands how to apply the law to the problem unless the legal
principles are repeated as they are applied. That is a poor use of time.
Level 5 and Level 6 examination papers
There were four different examination papers in Equity and Trusts this year, with
Zone A and Zone B papers set for both level 5 (LA2002) and level 6 (LA3002). The
questions were set and marked in order to evaluate the achievement of different
learning outcomes at each level (see the Module Descriptor). Level 5 candidates
are expected to ‘classify types of trusts and identify their main distinctive features
and purposes’, while level 6 candidates are expected to ‘compare and contrast
types of trusts and explain their main distinctive features and purposes’. Level 5
candidates are expected to ‘identify appropriate available remedies’, while level 6
candidates are also expected to ‘evaluate’ them. Level 5 candidates are expected
to ‘explore key issues in judicial decision-making’, while level 6 candidates are
expected to ‘evaluate’ them.
Question 2
May and Stuart are an elderly married couple with three adult children:
Charlie, Harriet, and Rose. May and Stuart decided to create a family trust for
the benefit of Charlie and Harriet. Rose, who was no longer in contact with
May and Stuart following a quarrel, was not included in the family trust. The
trust assets are worth £2 million.
Harriet was an experienced investment advisor, and May and Stuart relied
heavily on her investment advice. She advised them to invest in Tony’s new
business, so they paid £250,000 to him in exchange for shares in his new
company. May and Stuart did not know that Harriet and Tony had agreed that
Tony would keep £200,000 for his business and pay £50,000 to Rose. Harriet
was unhappy that Rose had not been included as a trust beneficiary and
knew that she badly needed money. Tony paid £50,000 to Rose. She thought
that it was a friendly loan and did not know that it came from the family trust.
Charlie discovers what has happened and seeks your legal advice. He does
NOT want to make any claims against May and Stuart, but wants to know if he
has any claims against Harriet, Rose, and Tony.
Advise Charlie.
General remarks
This is a problem question about dishonest assistance and knowing receipt, which
are discussed in Chapter 17 of the module guide and Chapter 11 of Penner.
Law cases, reports and other references the examiners would expect you to use
Royal Brunei Airlines v Tan [1995] UKPC 4, Re Montagu’s Settlements [1987] Ch
264, El Anjou v Dollar Holdings plc [1994] EWCA Civ 4, Agip (Africa) Ltd v Jackson
[1990] EWCA Civ 2, C. Mitchell and Watterson, S. ‘Remedies for knowing receipt’ in
C. Mitchell (ed.) Constructive and resulting trusts (Hart, 2010) 115.
Common errors
Common errors included treating this as a question on tracing.
A good answer to this question would…
consider that H may be personally liable for her own breach of fiduciary duty as her
parents’ investment advisor but is liable for dishonestly assisting a breach of trust,
even if her parents acted honestly (Royal Brunei v Tan). T may be liable for dishonest
assistance and knowing receipt but candidates should discuss whether he is liable
for knowingly receiving the £50,000 as he did not receive it for his own benefit (Agip,
El Anjou). R is not liable for knowing receipt because she acted honestly without
knowledge of the breach of trust (Re Montagu’s). A very good answer would discuss
whether a lower standard of notice is sufficient or even whether R should be strictly
liable on the basis of unjust enrichment.
Poor answers to this question…
simply restated the rules on knowing receipt and dishonest assistance or introduced
tracing.
Student extract
The problem is knowledge. There are three tests to determine knowledge in
knowing receipt. The first is the knowledge test in Re Baden, which divided
the knowledge into 5 categories. The first and second are subjective tests
that the defendant must have knowledge. The 3rd is a combined test that the
defendant ought to have known. The fourth and fifth are objective tests that
the defendant should have notice or ought to have notice of any suspiciously
received property.
Question 4
‘Any jurisdiction that permits trusts without beneficiaries for charitable
purposes can have no objection to trusts for non-charitable purposes.’
Discuss.
General remarks
This was an essay question about the beneficiary principle and trusts for private
purposes, discussed in Chapters 9 and 10 of the module guide and in Chapters 9
and 13 of Penner.
Law cases, reports and other references the examiners would expect you to use
Morice v Bishop of Durham (1804) 10 ves 522, Re Denley’s Trust Deed [1969] 1 Ch
373, Re Osoba [1978] 2 All ER 1099, Re Sanderson’s Trust (1857) 3 K&J 497, the
‘Enforcer principle’ debate between Hayton and Matthews.
Common errors
The most common error was to misread the question as a question solely on
charitable trusts.
A good answer to this question would…
discuss the difference between charitable trusts, which, although they have no
beneficiaries, are enforced by the Charity Commission on behalf of the Crown and
(anomalous) non-charitable purpose trusts that are not enforced as they have no
beneficiaries nor any other enforcer. It would also discuss whether an enforcer
principle could replace the beneficiary principle, as discussed in the literature.
Poor answers to this question…
gave a simple description of the law on charitable trusts with no reference to the
question.
Student extract
In English law, a trust must have a trustee [sic], otherwise it would fail. The
reason behind the rationale is that for a trust to be useful there should be
someone to enforce the trust. For a private purpose trust without a
beneficiary there would be no one with power to do sue. For example, say
the private purpose trust is for the improvement of poverty in England. Not all
English people would suffer if there is a breach of contract […]
Some may argue that the lack of an enforcer [sic] for a private purpose trust
could be eased by appointing an enforcer. However, the question here is
whether the enforcer would have a fiduciary duty. Not likely. If so, who can
ensure that the enforcer would exercise the power properly? And who are
willing to pay the cost of suing given that there is no beneficiary? It seems
that the question again would go back to square one.’
Comments on extract
The candidate confuses several terms (trustee/enforcer/beneficiary) but that may be
due to stress or tiredness under exam conditions. S/he focuses the answer on the
correct part of syllabus (the enforcer principle) and resists the temptation to write a
general essay about charitable or private purpose trusts. However, s/he fails to
mention any of the literature on the topic, the assessment of the problem is
unsophisticated and vague, and contains odd remarks (such as the one about breach
of contract) that indicate a lack of understanding of the subject. The answer was
awarded high third-class mark.
Question 5
In Re Gillingham Bus Disaster Fund (1958), Harman J said: ‘The general
principle must be that where money is held upon trust and the trusts declared
do not exhaust the fund it will revert to the donor or settlor under what is
called a resulting trust. The reasoning behind this is that the settlor or donor
did not part with his money absolutely out and out but only sub modo to the
intent that his wishes as declared by the declaration of trust should be carried
into effect. When, therefore, this has been done any surplus still belongs to
him. This doctrine does not, in my judgment, rest on any evidence of the state
of mind of the settlor, for in the vast majority of cases no doubt he does not
expect to see his money back: he has created a trust which so far as he can
see will absorb the whole of it. The resulting trust arises where that
expectation is for some unforeseen reason cheated of fruition, and is an
inference of law based on after-knowledge of the event.’
Discuss.
General remarks
This is an essay question about resulting trusts, which are discussed in Chapter 12
of the module guide and Chapter 5 of Penner.
Law cases, reports and other references the examiners would expect you to use
Re Gillingham Bus Disaster Fund [1958] Ch 300, Vandervell v IRC [1966] Ch 261,
Re Vandervell (No.2) [1974] 1 All ER 47, Pettit v Pettit [1970 AC 777, Westdeutsche
Landesbank Girozentrale v Islington LBC [1996] AC 669, Tinsley v Milligan (1993),
Air Jamaica v Charlton (1999), Patel v Mirza [2016] UKSC 42, s.54(2) LPA 1925, R.
Chambers Resulting trusts (OUP, 1997).
Common errors
These included confusing the different types of implied trusts.
A good answer to this question would…
would focus on the quotation and not merely reproduce a general essay on resulting
trusts. It would consider the role of intention in the creation of resulting trusts and the
reasons why these trusts arise.
Poor answers to this question…
offered a general essay on resulting trusts with no reference to the quotation.
Question 6
In Angove’s Pty Ltd v Bailey (2016), Lord Sumption said: ‘The exact
circumstances in which a restitutionary proprietary claim may exist is a
controversial question which has given rise to a considerable body of judicial
comment and academic literature. For present purposes it is enough to point
out that where money is paid with the intention of transferring the entire
beneficial interest to the payee, the least that must be shown in order to
establish a constructive trust is (i) that that intention was vitiated, for example
because the money was paid as a result of a fundamental mistake or pursuant
to a contract which has been rescinded, or (ii) that irrespective of the
intentions of the payer, in the eyes of equity the money has come into the
wrong hands, as where it represents the fruits of a fraud, theft or breach of
trust or fiduciary duty against a third party. One or other of these is a
necessary condition, although it may not be a sufficient one.’
Discuss.
General remarks
This is an essay question on constructive trusts, which are discussed in Chapter 13
of the module guide and Chapter 4 of Penner.
Law cases, reports and other references the examiners would expect you to use
FHR European Ventures LLP v Cedar Capital Partners LLC [2015] UKSC 45,
Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, Angove’s
Pty Ltd v Bailey [2016] UKSC 47, Pettit v Pettit [1970 AC 777.
Common errors
These included mistaking this for a question on resulting trusts. There were very few
answers to this question.
A good answer to this question would…
discuss the reasons why constructive trusts arose and whether they should arise in
the absence of a breach of trust or fiduciary duty when assets are obtained by fraud,
theft or mistake.
Poor answers to this question…
avoided the quotation and treated this as a general question on constructive trusts
rather than discussing the role of fraud, theft and breach of fiduciary duty.