Trusts Law

Notes, cases, and materials on trusts law

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William Blackstone

"Law, without equity, though hard and disagreeable, is much more desirable for the public good, than equity without law."

Lord St Leonards

"A Court of equity interposes only according to conscience."

Past Papers & Questions

Essay Questions:

Essay Questions

1. "Ultimately the Charities Act [2011] is critically flawed on the question of public benefit and should be revisited by Parliament.” (Public Administration Select Committee, 2013).

Critically discuss the extent to which the Charities Act 2011 is ‘critically flawed’ on the question of public benefit, and how it could be improved.

2. “The Court’s decision in Re Denley’s Trust Deeds raised more questions than it answered and should be overruled.” Discuss.

3. “Extending the constructive trust to cover bribes and secret commissions, which are obtained by a fiduciary, is an example of the courts fulfilling their role in Equity.” Critically discuss.

4. “There is no truly satisfactory explanation of the resulting trust in the law of England and Wales. Several models of the resulting trust have been set out in different contexts but each of them has significant problems." Critically discuss.

5. “Many forms of conduct permissible in a work-a-day world for those acting at arms’ length are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is the standard of behavior.” (Meinhard v Salmon, 249 N.Y. 458, 164 N.E. 545 (1928) (Cardozo J)). Critically analyse this statement.

6. ‘One of the great difficulties with the decision of the House of Lords in Barclays Bank v Quistclose Ltd[1970] AC 567 is squaring it with orthodox principles of trust law.’ Swadling W. (ed) ‘The Quistclose Trust’ (2004, Bloomsbury), p. 9.

Critically analyse whether any of the academic or judicial attempts to reconcile the Quistclose trust with trusts orthodoxy has been successful.

7. Critically discuss whether the existence of a beneficiary (or beneficiaries) is essential to establishing a valid trust.

8. Critically analyse the judiciary’s approach to the “public benefit” requirement (Charities Act 2011 s.2 (1)(b)) in the context of charities for religious and political purposes.

Problem Question 1

Ross was born in Penzance, Cornwall. Many of his ancestors had been involved in the tin mining industry and his father, who was past retirement age, had expected him to take over the small museum that he had managed all his life. Ross was determined to lead a more prosperous life, however. He had moved to Coventry 20 years ago and was doing very well for himself in business there. Nonetheless, he retained an interest in Cornwall’s mining history and had an extensive collection of maps and records of all the old mines in the county. Coming from Cornwall, he knew of the importance of good transport links and so led a campaign to relocate the capital from London to Coventry, a city close to the central point of England.

Sadly, Ross died in April 2017, after a long illness. In his will, he appointed Stefan and Tamara to be his executors and trustees and instructed them to hold and distribute his estate as follows:

  1. 'One half of my archive collection to be given to the Mining Museum, Penzance; as to the other half, my trustees can give one item each to any local person who wants one;
  2. £500,000 to my trustees for them to dispose of within ten years of my death, if they think it appropriate, amongst the inhabitants of Cornwall; the rest to be divided equally between those who have taken care of me during my last illness;
  3. The residue of my estate to be distributed, at the discretion of my trustees, for the benefit of people who are dedicated to relocating the capital to Coventry, so that more people can access their nation’s capital; if there is any dispute as to whether a person is so dedicated, it shall be resolved by my beloved daughter, Demelza.’

Critically discuss the validity of Ross’s bequests.

Problem Question 2

Max was the managing director of Cliffsports Ltd, a company that specialises in extreme sports events across the South West. He and his partner, Naomi, were keen members of the Tombstoning Club. (Tombstoning involves jumping off cliffs without safety equipment.) This club is separate from the company but only the company’s employees are eligible to join the Club and they pay £1,000 per annum in subscriptions, which are deducted from their salaries. Members of their families are entitled to join as Associate Members for half the normal subscription. They cannot vote on Club matters but they are entitled to attend events for a small fee. Naomi is the secretary to the Club and works tirelessly to attract new members, as the number of members has been dropping in recent years. She also organises various fundraising events to keep the Club’s bank account in a healthy position.

In March 2017, Max died after jumping off a cliff at Polzeath and Naomi is keen to do something in his memory. She has decided to write a will and would like to leave £500,000 to the Tombstoning Club, to be used for the purpose of constructing and maintaining a new Extreme Sports Activity Centre in loving memory of her partner, Max.

Naomi asks for your advice as to how this might be achieved and what the consequences would be if the Tombstoning Club were to close.

Advise Naomi

Problem Question 3

Tariq held £1 million on trust for the Vizard family trust. Tariq was the only trustee. He had no investment experience. Among the terms of the trust is Clause 23 which provided: “The trustee is only permitted to invest the trust fund in the shares of companies quoted on the FTSE-100”.

On 1 September 2016, Tariq met a financial advisor, Martin, while seeking investment advice for the trust. Martin and Tariq had been friends at university. Martin advised Tariq that FTSE-100 companies were a poor investment at the time because the stock market was so volatile. Therefore, Martin advised Tariq to consider investing in carefully selected private companies. Tariq gave Martin a copy of the Vizard family trust instrument.

Martin was employed by Profit Bank Plc, a private bank which specialised in providing banking services for very wealthy families. Martin was not a member of the board of directors, but he was responsible for all family trust investments made through Profit Bank Plc, which amounted to 15% of the bank’s total income.

Martin had been offered a personal bonus of £10,000 if he found investors for a new company, Squeaky Software Ltd. The company had been created by Zoe to develop tablet apps. Zoe and Martin had been friends for many years. It was Zoe who offered Martin the commission.

Tariq paid the £1 million trust fund to Profit Bank Plc. Profit then made the investment in Squeaky Software Ltd at Martin’s instruction.

Shares in Squeaky Software Ltd have subsequently fallen in value after a number of their new products failed. The trust’s investment has lost £30,000. Tariq is now personally bankrupt.

Martin maintains that his personal business motto is: “No risk is too large if there is a profit to be made”. His view is that all customers must be prepared to take risks to make profits in financial investments.

Advise the beneficiaries of the Vizard family trust as to whether they have any claim against Martin and/or Profit Bank Plc and, if so, what remedies might be available.

Problem Question 4

Arthur was the sole trustee of the Patel family trust. The trust fund contained three valuable sculptures: Faith, Hope and Charity. Arthur had problems with addiction. He began to take property from the trust.

On 1st February, Arthur sold Faith to Billy for £10,000. He paid the sale proceeds into bank account No.100 in which there was no other money deposited. That money was then used by Arthur to acquire shares in Dingle Plc.

On 2nd February, Arthur sold Hope to Claire for £20,000. He paid the sale proceeds into bank account No.200. Bank account No.200 already contained £40,000 which Arthur held on trust for his children. On 3rd February, Arthur withdrew £15,000 from the account and bought shares in Sparky Plc which have subsequently trebled in value. On 4th February, Arthur withdrew £25,000 and bought Dull Plc shares which have not changed in value. On 5th February, Arthur withdrew the remaining money and used it to buy Tromp Plc shares which have since halved in value. The terms of the children’s trust provided that the fund should be invested in shares in Sparky Plc and Dull Plc.

Claire can produce a written receipt, signed by Arthur, which reads: “Sculpture, entitled to be sold by the trustee, for £20,000”. Claire has no experience of the art market.

On 6th February, Arthur sold Charity to Dipali for £30,000. Arthur paid the sale proceeds into bank account No.300. Bank account No.300 already contained £1,000 belonging to Arthur personally. Arthur spent £1,000 on a holiday in Spain. He spent the remaining money on discharging the last amount owing under his mortgage.

Arthur is now personally bankrupt.

Advise the beneficiaries of the Patel family trust.

Problem Question 5

Daniel, a retired watchmaker, makes a will with the following provisions:

  • I leave my house to my beloved wife, Charleen. On her death, I direct that the house be sold and the money be divided equally between my children;
  • I leave £100,000 to my trustees for the benefit of my children, while they remain unmarried and adherent to the Congregationalist Faith;
  • I leave my collection of watches to the University of Oxbrah, but any of my friends may take one of them as a keepsake to remember me by;
  • I leave my two grandfather clocks to my trustees to hold for my beloved wife, Charleen, during her lifetime. On her death, my nephew George shall take whichever one of the two he shall choose and the remaining clock shall be given to my niece Ophelia.
  • I leave a sufficient sum of money to provide a decent standard of living to my sister during her lifetime. On her death, any remaining money that she shall not have used shall be given to the people of Oxbrah.
  • I leave any remaining money to my trustees to be used for the maintenance and care of my horse, Eric.

Consider any issues that might arise from these provisions.

Problem Question 6

John is a solicitor and one of the trustees of a private family trust, of which Kavya is the beneficiary. The trust fund is invested in shares on the London Stock Exchange and other financial instruments. There is also £80,000 in cash, following the sale of some shares, which is held in a separate client account operated by John’s firm of solicitors.

John likes to gamble, and has an account with a local independent bookmaker, William Hall. His account with them is currently £50,000 in deficit. John decides that he will take the money from Kavya’s trust fund account.

When he logs on to the computer system, however, John realises that the firm has just had a new system installed, which requires two solicitors to approve a transfer. Furthermore, John does not know how to operate the new system. He asks Morris, a newly qualified solicitor, to help him make the transfer from the trust account into Hall’s account.

John gives Morris the name, account number and sort code of Hall’s account, and Morris sets up the transfer. Morris knows that there is a local independent bookmaker called William Hall and he is also aware of rumours that John has a gambling problem. He asks John why he is transferring the money. John says, ‘don’t worry about it – it’s quite legitimate’. Morris is not reassured by this, but he does not want to challenge a more senior colleague. He goes ahead and approves the transfer.

John calls Hall to check that the money has been credited to his account. He then places a bet with the credit balance of £30,000 on a horse, saying to Hall, ‘I hope that this wins, because I need to get the money back into the client account before anyone notices.’ The horse loses.

Consider whether Morris or Hall are personally liable to Kavya. Do not consider any proprietary remedies or the liability of any other party.

Problem Question 7

In 2000 a group of people formed a non-charitable unincorporated association with the aim of campaigning for a change in the law so as to prevent cruelty to foxes. Money was raised by subscriptions of members, raffles and competitions, and street collections.

At its peak, in 2004, the society had a membership of 250. That year, the Hunting Act was passed, making traditional fox-hunting illegal. At that point, the association’s funds stood at about £500. Thereafter most members lost interest and drifted away, though a few of them still continued to campaign against the treatment of foxes in ways which they considered cruel and which were not covered by the Act. In 2005 this group had fifty members, and today it has only one. Between 2004 and today, the association’s funds have fallen to £250. In addition to this £250, a wealthy member who died in 2007 has left £250,000 to the association in her will “for the purpose of pressurising Parliament to increase the criminal penalties provided under the Hunting Act 2004” – though due to delays in administering her estate, the bequest has only just become available.

Critically analyse the ownership of the association’s funds.