Examiners’ reports 2023

Examiners’ reports 2023

LA3002 Equity and Trusts – Zone A

Introduction
The underlying approach of the paper is that marks do not turn on the identification
of the ‘right’ answer but rather on the reasoned explanation of an answer that is
plausible. Of course, errors of law cannot be rewarded but it is possible to make
mistakes and do well. There is also room for legitimate disagreement about the
proper approach to concepts and ideas and there is no intention to require
candidates to take one approach or another.
Where a question is divided into parts, all parts of the question carry equal marks
but the examiners will give a mark for a question that reflects its overall quality
rather than the sum of its parts.
Good answers will inevitably deploy relevant case law. The absence of case law will
normally lead to a less good mark, even a failing mark as it can demonstrate a
failure of legal method.

Comments on specific questions

Question 1
‘It is clear that a purpose must be ‘for the public benefit’ in order for it to be
recognised as charitable. It is less clear what this means.’
Discuss.
General remarks
This is a traditional question concerning charitable trusts. It is discussed in detail in
Chapter 9 of the module guide. It requires good use of case law, for that is where
the meaning of ‘public benefit’ is explored.
Law cases, reports and other references the examiners would expect you to use
The context requires some discussion of the Charities Act 2011, especially ss.3 and
4. Relevant cases include: Dingle v Turner; Oppenheim v Tobacco Securities Trust
Co, Gilmour v Coates, IRC v Baddeley and Independent Schools Council v Charity
Commission.
Common errors
The most common error was for candidates to repeat the definition of charity found
in Pemsel’s Case. Not only is the definition of charity no longer found in that case
(see now the Charities Act 2001), the question is not about the definition of
charitable purposes per se but about the meaning of ‘public benefit’ in the law of
charity.

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A good answer to this question would…
identify briefly why ‘public benefit’ is required for a purpose to be charitable. It would
identify the two general ways in which public benefit is used: to explain that the
purpose must be ‘beneficial’ and that this benefit must be available to the ‘public’.
The first sense does require some discussion of what types of purposes have been
held to be charitable (see now s.3 Charites Act) and the role of s.4. The second
meaning involves discussion of the various ways in which the courts test whether a
purpose is for the ‘public’. There should be some discussion of the case law
identified above, especially Independent Schools Council v Charity Commission.
Poor answers to this question…
failed to discuss ‘public benefit’ and merely repeated the ‘four heads’ of charity from
Pemsel’s Case. They failed to conclude whether the meaning of public benefit is
clear. An answer cannot score well if it is merely a general essay on ‘charity’.
Question 2
Xera is a wealthy businesswoman. In January 2023 she tells her friend, Tulsa,
that she is leaving £30,000 in her Will to Tulsa but that Tulsa is to pay this
money to Betty, Xera’s daughter from a previous relationship. Tulsa readily
agrees. Xera also tells Tulsa that she has left her house to Tulsa, but that she
wants Tulsa to give it to Charlie, Xera’s son, when Charlie reaches 21 years of
age. In the meantime, Xera says that Tulsa can live in it. Tulsa is not sure
about this, as she has always loved the house and says that she will think
about it. In February 2023 Xera draws up her Will, having been diagnosed with
a serious illness. She dies in April 2023. In the Will, the £30,000 and the house
is left to Tulsa absolutely. The Will also leaves shares in Luxor Ltd, a private
company, to Stephan ‘on trust in order that he fulfil my wishes’. Stephan
reveals that in January 2023, Xera asked him to hold the shares on trust in
equal parts for Daphne and Ego, Xera’s brother and sister.
Francine is the residuary legatee under the Will who will receive any property
not validly disposed of. Charlie is now 21 years old, but Tulsa is insisting that
the house is hers. Betty was a witness to Xera’s Will and, unfortunately,
Daphne died before Xera.
Francine comes to you for advice.
General remarks
This problem question requires candidates to explain and apply the law relating to
secret trusts, both fully secret and half-secret. This is dealt with in Chapter 14 of the
module guide. Candidates should explain (very briefly) why such trusts are enforced
because this sheds light on the ‘rules’ that need to be applied.
Law cases, reports and other references the examiners would expect you to use
Section 53 LPA 1925 is clearly relevant as it establishes the formalities required to
create trusts, especially trusts of land. Relevant cases include: Blackwell v
Blackwell, Ottaway v Norman, Re Keen, Re Gardner, Re Young, Re Boyes,
Titcombe v Ison.
Common errors
A common error is to ask irrelevant questions: e.g. are the three certainties
present? That is not needed in a question clearly about secret trusts. Likewise, it is
not necessary to discuss the reasons why secret trusts exist unless it helps resolve
a practical issue in the problem. This is not about the rationale for secret trusts, or
whether these trusts are express or constructive.

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 Examiners’ reports 2023

A good answer to this question would…

discuss the fully secret and the half-secret trust separately and briefly explain their
justification. A good answer would state the relevant rules and apply them to the
actual facts. The relevant rules include the communication rules, the witness rule,
the rule concerning potential beneficiaries who predecease the testator. A good
answer would clearly establish whether the dispositions were valid and who would
take the property subject to the trusts.
Poor answers to this question…
failed to identify that there is both a fully secret and half-secret trust. They also
failed to clearly identify the rules about the operation of such trusts and if they are
different. Poor answers also wasted time and words discussing the rationale for
such trusts. That is barely relevant to the question, save in so far as it helps resolve
the practical issues in the problem.
Question 3
‘In the opinion of the Board, it follows from Lord Millett’s injunction that
subtle distinctions should not be drawn between different species of trusts
for the payment of creditors that the term Quistclose trust may commonly be
used whenever a person provides assets to another for the purpose of paying
debts under arrangements which create a trust (see per Lord Millett at paras
68 and 69). A Quistclose trust can take many forms. It may be express as to
what is to happen on failure of the specified purpose, or express only as to
that purpose, or it may simply be a resulting trust arising by operation of law:
such is the flexibility of equity.’ (Lady Arden, Prickly Bay Waterside Ltd
(Appellant) v British American Insurance Company Ltd (Respondent)
(Grenada) [2022] UKPC 8 para. 32.)
In the light of this quotation, analyse why Quistclose trusts are valid in the
law of England and Wales.
General remarks
The quotation is, of course, a vehicle for discussion of the rationale and operation of
Quistclose trusts. This is dealt with in Chapter 12 of the module guide where there
is a full discussion of the various approaches to understanding Quistclose trusts.
Law cases, reports and other references the examiners would expect you to use
Barclays Bank Ltd v Quistclose Investments Ltd; Twinsectra Ltd v Yardley; Ali v
Dinc and Prickly Bay Waterside Ltd v British American Insurance Company Ltd. For
Quistclose trusts generally, see Swadling, W.J. ‘Orthodoxy’ in Swadling, W.J. (ed.)
The Quistclose trust – critical essays. (Oxford: Hart Publishing, 2004); Millett, P.J.
‘The Quistclose trust: who can enforce it?’ (1985) 101 LQR 269; Glister, J.A. ‘The
nature of Quistclose trusts: classification and reconciliation’ (2004) 63(3) Cambridge
Law Journal 632.
Common errors
The question does not require an examination of the facts of the Prickly Bay case,
nor does it call for a general analysis of resulting trusts. It was clear that many
candidates had prepared an answer on the nature of resulting trusts and simply
repeated it.
A good answer to this question would…
A good answer would lay out the essentials of a Quistclose trust and discuss the
leading cases. The opposing views of Lord Wilberforce in Quistclose and Lord Millet
in Twinsectra should be discussed. Academic commentary is key and plentiful. A
really good answer would discuss, albeit briefly, whether a better approach would
be to recognise the enforceability of purpose trusts, rather than seek to explain
Quistclose trusts on an orthodox basis.

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Poor answers to this question…
failed to address the rich discussion about the rationale of Quistclose trusts and
instead merely identified the facts of these cases. They also drifted in to a general
essay on resulting trusts.
Question 4
Discuss the validity of the following dispositions in the Will of Nia, who died
last month:
(a) £10,000 to my trustees to distribute equally among the people who
studied law with me at university. Nia was one of 50 people who
studied law at Crowcroft University and who graduated together;
(b) £20,000 to my trustees believing they will look after my close friend,
Ena;
(c) £40,000 to my trustees to distribute as they see fit among the
candidates of Crowcroft University; and
(d) £80,000 to my trustees to distribute as my close friend Ena shall
choose from among the law lecturers of Crowcroft University within
two years of my death, failing which the balance shall be distributed to
all lecturers of Crowcroft University equally.
The trustees wish to carry out all of these instructions. Unfortunately, the
records of past candidates of Crowcroft University have been destroyed in a
fire. There are currently 5,000 candidates studying there. Ena has asked the
trustees to pay all of the £80,000 to Dr Max, her brother.
General remarks
This problem on ‘the three certainties’ raises familiar issues (dealt with mainly in
Chapter 5 of the module guide). It requires a lucid statement of the relevant
principles and clear application of those principles to these facts.
Law cases, reports and other references the examiners would expect you to use
IRC v Broadway Cottages, McPhail v Doulton, Re Baden (No 2), Re Gulbenkian,
Burrough v Philcox, R v West Yorks CC.
Common errors
The most common error was failure to identify that the question concerned the three
certainties. A number of candidates thought the question concerned charities (NB –
it would be highly unlikely for a paper to contain two questions on the same
subject!).
A good answer to this question would…
state the law accurately (bearing in mind points of legitimate disagreement) and
then apply it to the actual facts of the problem before them. In respect of certainty of
objects, a good answer will first identify the nature of the clause: is it a fixed trust,
discretionary trust, fiduciary power or mere power? Then, identify the relevant tests
and how they have been interested. It will finish with an application of the relevant
test and clear conclusions.
Poor answers to this question…
failed to identify the appropriate tests for certainty of intention and assumed that the
law is ‘clear’ – and at least we know what the tests are. But that does not explain
why the three judges in Court of Appeal in Re Baden interpreted the tests in
different ways. There is nothing here on certainty of subject matter and there is no
need to discuss it. General answers on certainties will attract fewer marks: the key
is application of the law to these facts.

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Candidate extract
(a) Firstly, it needs to identify whether there is certainty of intention to create
a trust or just a request which the trustees can comply with or ignore as a
they wish. As per Re Hamilton, Court must look at all the words used by the
testator/settlor to determine if, on their true construction in the context of the
particular gift, trust is intended. The test to determine what the actual
intentions of the testator were, looking at the words as a whole, rather than
focusing only on particular(a) words. Here, in Nia's (N) will, ‘to my trustees’
shows her intention to create a trust. The subject matter is clear as 10,000
Euros as Nia's will states that ‘10,000 Euros to my trustees’.
The issue here is identifying the objects of the trust. Fixed trust is where the
beneficiaries receive the trust property on a specific schedule set forth by the
testator/settlor. This can identified as a fixed trust as the N instructed in the
will that the 10,000 Euros must distribute among beneficiaries equally. In
fixed trusts , trustees must be able to draw up a complete list of all the
beneficiaries. If not, as per the case of IRC v Broadway Cottages (1955),
the trust fail. To trustees to make a complete list of beneficiaries there must
be, conceptual certainty and evidential certainty. Conceptual certainty is the
class itself and the class must be ascertainable and must be capable of being
defined. As per the will, Nia stated that the 10,000 Euros is to be distributed
among people who studied law with her at the university. This is conceptually
certain. Evidential certainty refers to the individuals falls within the class who
must be capable of being identifiable. As per the given facts, N was one of 50
people who studied law at Crowcroft university and graduated together. Thus,
trustees are able to draw a complete list of beneficiaries (the other 49 who
studied law with N in Crowcroft university) by referring to the candidate
register of the Crowcroft university. However, as per the given facts, the
records of past candidates of Crowcroft university has been destroyed in a
fire. Since the records are destroyed, the trustees may not be able to actually
find the actual list of peple who studied law with n in Crowcraft university.
Thus, if the trustees would not be able to create a complete list of other 49
people who studied law with N in Crowcraft university, the trust will fail for
lack of certainty of objects and the 10,000 Euros will be held on a resulting
trust for N's estate.
Comments on extract
This extract is from an answer that secured a low 2:1: it fell just into the 2:1 class.
The candidate starts poorly. There is no need to spend any time on obvious points
– there is no doubt about certainty of intention. Dealing with obvious points like this
can create a poor impression. Candidates should not ‘start at the beginning’ with
every answer but instead should go to the points in issue. This demonstrates that
they understand the question. The answer then improves: the candidate identifies
correctly that this is a fixed trust (‘equally’). The candidate then correctly identifies
the test of certainty for objects for a fixed trust (IRC v Broadway Cottages). The
candidate then applies this test to the facts of the problem in a clear way. It is
possible that the fixed list test requires only knowledge about the number of the
people in the class, rather than their identify, and that point would have lifted this
answer well into the 2:1 class.

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Question 5
To what extent is it true that ‘equity will not perfect an imperfect gift’?
General remarks
This is a general essay question on the formalities for the creation of trusts. A
variety of answers are possible and it is dealt with in Chapter 7 of the module guide.
There is no particular approach that is ‘better’ than another. The intention was to
give candidates the ability to make something of the question in the light of their
knowledge.
Law cases, reports and other references the examiners would expect you to use
Milroy v Lord, Pennington v Waine, Khan v Mahmood, IRC v Grey, Grange v
Wilberforce. Some candidates might discuss donatio mortis causa, Strong v Bird
and proprietary estoppel.
Common errors
The most serious common error – and it was common – was a failure to use case
law. A general discussion of the principles with no, or few cases, will attract low
marks even if the law is accurate. A candidate must justify their answer, not merely
state it.
A good answer to this question would…
explain the various limbs of the ‘imperfect gift’ rule and relate them to the formalities
required to create a valid trust. The exceptions to Milroy v Lord would be clearly
stated. As the exceptions are judge made, cases are key. It is unlikely that a
candidate would be able to discuss all of the ways equity does intervene to perfect
an otherwise imperfect gift but the Pennington case is a crucial one, especially
given its application in Khan v Mahmood.
Poor answers to this question…
failed to explain what ‘imperfect’ means and why equity is reluctant to enforce such
gifts. Is it because the ‘trust’ is a very powerful obligation and thus there needs to be
certainty about its existence and what it requires. The answer is very dependent on
case law and poor answers also failed to answer the question – a conclusion needs
to be provided to make it clear that the candidate is thinking about the question.
Candidate extract
This essay deals with the concept of constitution of a trust. In order to
determine the extent of truth of the above statement it is first necessary to
identify the concept of ‘equity will not perfect and imperfect gift’ and further
move on to the exceptions to this rule in order to determine to what extent the
statement is true. A trust is only completed once the property of the trust is
handed over to the trustee this concept is closely affiliated with the equity
general principals on how to deal with gifts. The case of Millroy V Lord laid
down the three modes on how a gift can be made firstly an outright transfer of
the legal property, secondly transfer of the legal property to a trustee who will
hold it on trust or lastly a self declaration of trust. The maxim that equity will
not perfect an imperfect gift is seen in this particular case as courts held that
it was invalid as it transferring of a share certificate did not be considered as
valid mode of constitution. The courts may also not revert to any other mode
in case the trust has failed as seen in the cases of Richards v Delbridge
and Jones v Lock. However this can be contrasted with the case of T
Chouthram SA V Pagrani.
Comments on extract
This answer scored a low 2:2 mark. The answer starts well by discussing what is
meant by ‘perfecting’ (or rather not perfecting) a gift or trust and relevant case law is

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used (Milroy). The answer is well structured and the candidate signposts how their
answer is going to progress. There is accuracy about the general principles and this
earns marks. This is a good example of how to start an answer well. Unfortunately,
the candidate then goes on to deal with the exceptions to the Milroy principle in a
very brief and uncritical way. In essence, the rest of the answer is a brief list of all
the times when the courts have stepped in to perfect an otherwise imperfect gift.
There is no detail and no analysis and very few cases. So, while this is a good start
to a question, the candidate fails to develop their answer. The answer after this
lacks detail and results in a low 2:2. In fact, it is this introduction that saves the
answer from being third-class overall. The lesson is thus to be clear in the
introduction to an answer but to follow it up with detail and precision.
Question 6
Armand holds £100,000 on trust for Ze held in a current bank account.
Armand has the power of investment to invest in shares in public companies,
but no other power. In February 2023 he withdraws £20,000 and gives it to his
sister, Beatrice. Beatrice believes Armand when he says that he won the
£20,000 at a casino and she buys a painting at a local art gallery for £10,000
and spends the rest on a luxury holiday. Armand withdraws £30,000 from the
bank account and, with the aid of his other sister, Cassandra, buys what he
believes to be precious diamonds. The diamonds turn out to be worthless.
There is £50,000 remaining in the bank account, which Armand withdraws and
invests in shares in Sponge Ltd.
Armand is now bankrupt. The painting purchased by Beatrice turns out to be
a hidden masterpiece worth £150,000. The shares in Sponge Ltd have fallen in
value, but there are rumours that they are about to triple in value.
Advise Ze.
General remarks
The question concerns remedies available to a beneficiary in the event that a
trustee is unable to make amends for a breach of trust/fiduciary duty. Perhaps the
trustee or fiduciary is bankrupt or deceased. The topic is dealt with in Chapter 18 of
the module guide, with some reference to Chapter 16. It largely concerns the law of
tracing.
Law cases, reports and other references the examiners would expect you to use
Re Tilley, Re Hallet, Re Oatway, Foskett v McKeown, Agip (Africa) Ltd v Jackson,
Serious Fraud Office v Hotel Portfolio II UK Ltd, BCCI v Akindele, Twinsectra v
Yardley, Ivey v Genting.
Common errors
A common error was to consider claims against the trustee – but the trustee is
bankrupt and has no assets. That is all that needs to be said. There is no need to
consider the conceptual base of tracing – this is about the application of tracing
rules. Some candidates failed to consider whether there could be a claim in
unconscionable receipt. These are not ‘single subject’ questions.
A good answer to this question would…
take each asset/breach of trust in turn and apply the tracing rules. A good answer
would have identified those rules, with case law. Accuracy is key in tracing – a good
problem question answer would not be sidetracked into discussions about the
nature of these claims. Consequently, the beneficiary might wish to trace into the
painting, diamonds and shares, and good candidates will identify the conditions for
tracing and apply them to these facts. A good candidate will consider whether the
beneficiary will be able to claim any increase in value in the traceable proceeds. A
good candidate will also consider the possibility of an unconscionable receipt

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claim against Beatrice (should it be needed). Likewise, there is the possibility of a
dishonest assistance claim against Cassandra, although the factual basis of the
claim is weak.
Poor answers to this question…
failed to identify that there is an obvious breach of trust. Likewise, they considered
the personal liability of the trustee, which is pointless. There was a tendency simply
to give an answer – but this is the sign of a weak candidate. Reasons, based on
case law, are more likely to gather marks than simply stating the answer – even if
that answer is correct.